If you're an Australian startup founder, you’re likely exploring how to use equity to attract and retain top talent. That’s where the Employee Share Scheme (ESS) comes in—it enables early-stage companies to offer shares or options to employees, giving them a real stake in your success.
But here’s the challenge: to stay compliant and tax-efficient, you need a defensible valuation of your company’s shares. Done poorly, this can lead to regulatory issues and undermine employee trust. Done right, it becomes a strategic asset for growth.
This guide will walk you through the why, when, and how of ESS valuations in Australia, breaking down the two valuation approaches, how to streamline the process, and common pitfalls to avoid.
What Is an ESS Valuation?
An ESS valuation determines the fair market value of your company’s shares when granting them under Australia’s Employee Share Scheme rules. This value is essential for:
ATO compliance: Ensuring employees don’t face immediate tax liabilities
Setting strike prices: Issuing options at market value (or above)
Trust and transparency: Giving employees confidence in their equity
There are two main methods of valuation under the ESS rules, each with its own eligibility requirements and implications—NTA (Net Tangible Assets) and Formal Valuation.
ESS Startup Concession Checklist
Use the following questions to determine whether your company qualifies for the ESS startup concession:
Is your company unlisted and incorporated less than 10 years ago?
Is your aggregated turnover under $50 million?
Will shares/options be issued at or above market value?
Are shares/options subject to a minimum three-year holding period?
If you answered yes to all, your startup qualifies—and your employees could benefit from significant tax deferral advantages.
The Two Main ESS Valuation Approaches: NTA vs. Formal Valuation
1. NTA (Net Tangible Assets) Valuation
Eligibility:
✔ Raised less than $10M in the past 12 months
✔ Less than 7 years old OR under $10M revenue
✔ Prepares financial reports
How it works:
Assets – Liabilities ÷ Number of ordinary shares
Pros:
Fast and cost-effective
Often results in lower strike prices (beneficial for employees)
Cons:
Only for early-stage companies
May undervalue IP-rich or tech-driven businesses
2. Formal Valuation
Required if:
You’re no longer eligible for NTA due to funding, revenue, or age
How it works:
Combines methods like DCF analysis, market multiples, and comparable transactions to estimate value
Pros:
More accurate and defensible
Takes growth potential and intangibles into account
Cons:
More expensive ($5K–$20K)
Slower (4–12 weeks)
Requires financial projections
When to Use a Professional ESS Valuation
Even if you qualify for a DIY approach, a professionally supported valuation provides two major advantages:
ATO Assurance – More likely to pass scrutiny
Employee Trust – Adds credibility to your equity offer
How Equidam + Standard Ledger Simplify ESS Valuations
The traditional valuation process can be slow, costly, and admin-heavy. That’s why Equidam and Standard Ledger teamed up to make it easier, faster, and more accessible for startups.
What This Collaboration Offers:
Integrated Data Flow:
Equidam’s valuation tech syncs seamlessly with Standard Ledger’s advisory services—no more re-entering financials or chasing down docs.Efficiency Gains:
For NTA: A few inputs on Equidam and quick verification = compliant report in days
For Formal Valuation: Equidam provides the modeling framework, and Standard Ledger completes the ATO-ready reportCost & Time Savings:
Centralized data means lower fees, faster turnaround, and less distraction from building your business
Step-by-Step: How to Complete Your ESS Valuation
Step 1: Check Your Eligibility
Ask yourself:
Have you raised < $10M in the past year?
Are you < 7 years old or earning < $10M revenue?
Do you prepare financial reports?
If yes to all: You can use NTA valuation
If no to any: You’ll need a formal valuation
Step 2: Update Your Equidam Profile
Make sure your data is current:
Upload latest financials
Ensure your cap table is up to date
Review projections
Tip: The better your data, the smoother the process.
Step 3: Engage Standard Ledger via Equidam
Log in to your Equidam profile
Select valuation type (NTA or Formal)
Provide any additional documents
Book a quick call if needed
Step 4: Finalize Your Valuation
NTA: Standard Ledger reviews your inputs, applies ATO guidelines, and issues a compliant report
Formal: Deeper analysis, blending valuation techniques, resulting in an ATO-ready document
Step 5: Implement Your ESS
With your valuation in hand:
Set your strike price confidently
Draft offer letters and plan communications
Ensure employees understand how equity fits into the big picture
Common Mistakes to Avoid
Outdated Valuations: Refresh after funding or annually
Ignoring Preference Shares: Reflect them accurately in your cap table
Missing Eligibility Triggers: Watch out for age/revenue/funding limits
Weak Documentation: Keep a clear paper trail—you may need it later
Conclusion: Take Action Today
Getting your ESS valuation right isn’t just a legal requirement—it’s a strategic advantage. It helps you:
Attract and retain talent
Stay compliant with ATO rules
Build trust with employees and investors
By leveraging the combined strength of Equidam and Standard Ledger, you can simplify the process without sacrificing accuracy or control.
Start now:
Check your NTA eligibility, update your Equidam profile, and engage Standard Ledger to get your valuation sorted—before it becomes a bottleneck for growth.