Restricted Stock Australia 2025: Latest Rules, Tax & Opportunities

Restricted stock is no longer a niche concept limited to Silicon Valley. In 2025, it’s gaining traction in Australia as both startups and ASX-listed companies embrace new ways to attract and retain top talent. But what exactly is restricted stock, how is it being used under current Australian regulations, and what do the latest tax changes mean for employees and investors?

What Is Restricted Stock and How Does It Work?

Restricted stock refers to shares in a company that are granted to employees, directors, or consultants but come with conditions on when they can be sold or transferred. Usually, these conditions are linked to time-based vesting (e.g., after three years of service) or performance milestones (e.g., hitting a revenue target).

• Vesting schedules: Shares are earned over time or after certain goals are met.
• Forfeiture risk: If an employee leaves before vesting, they may lose unvested shares.
• Transfer restrictions: Shares generally can’t be sold or transferred until restrictions lapse.

Unlike stock options, which give the right to buy shares at a set price, restricted stock grants actual shares upfront, but with strings attached.

2025 Policy Updates: ESS Reforms and Taxation Changes

Australia’s approach to restricted stock has shifted significantly since the 2022 Employee Share Schemes (ESS) reforms. In 2025, these changes are having a real impact:

• ESS Disclosure Relief: Startups and SMEs can now offer up to $30,000 worth of shares per employee per year (plus 70% of dividends and cash bonuses) without triggering expensive disclosure requirements.
• Expanded Eligibility: More contractors and casual workers can participate in ESS programs, broadening the talent pool.
• Tax Timing: Employees are typically taxed when the shares vest or restrictions lift—not at the grant date—helping to avoid cashflow issues.

For example, if a fintech startup grants an engineer 5,000 restricted shares that vest after three years, the engineer won’t face a tax bill until those three years are up and the shares become theirs to sell.

The ATO has also clarified that capital gains tax (CGT) applies from the date restrictions end, meaning any future gains are taxed as capital gains, not income.

Who’s Using Restricted Stock in Australia—and Why?

The use of restricted stock is expanding beyond tech unicorns. Here’s how it’s being used in 2025:

• Startups: Early-stage companies use restricted stock to compete with larger employers on total compensation, especially when cash is tight.
• Listed companies: ASX firms are adding restricted stock to executive packages to align leadership with long-term shareholder value.
• Scaleups and SMEs: With relaxed ESS rules, more medium-sized businesses are offering restricted stock to attract experienced talent from overseas and retain key staff during growth phases.

One standout example is a Brisbane-based SaaS company that reported 80% of its senior hires in 2024-25 received some form of restricted stock, with vesting tied to both company and personal performance metrics.

Key Considerations for Employees and Investors

Before accepting or investing in restricted stock, consider these factors:

• Liquidity: Shares may remain illiquid until a company lists, is acquired, or restrictions lapse.
• Tax impact: Understand when your tax liability kicks in and plan for potential CGT on future gains.
• Company performance: If vesting is tied to ambitious targets, assess how realistic those milestones are.
• Shareholder rights: Restricted shares usually come with voting rights and dividends, unlike many stock options.

For investors, widespread restricted stock plans can dilute ownership but may also improve talent retention and company performance.

The Bottom Line: Restricted Stock as a Strategic Tool in 2025

In 2025, restricted stock is more accessible and flexible than ever, thanks to evolving ESS rules and a focus on aligning incentives. Whether you’re an employee negotiating your next package or an investor evaluating a company’s capital structure, understanding the mechanics and tax implications of restricted stock is crucial to making informed decisions in Australia’s dynamic market.