Will employee equity power Australia’s next wave of wealth?

Over the past decade, we've seen a quiet yet significant shift for Australian businesses. Employee share schemes (ESS) are no longer the sole domain of venture-backed tech startups. Now, we're starting to see them being leveraged by businesses across industries and sizes.

The Treasury's own small-business guidance now presents ESS as a straightforward way for SMEs to "attract, retain and motivate staff," signalling policy support well beyond the tech sector. Early adopters show the model can thrive in a traditional service business too. 

As these examples multiply, equity is evolving from a niche incentive into a mainstream lever for growth, retention and succession planning. What is it about Australia's market conditions that has set this flywheel in motion - and how can business leaders make sure it keeps spinning?

Australia's regulatory environment 

For the past decade, the Australian government's policy agenda has moved employee ownership in the right direction. The 2015 ESS overhaul introduced a startup concession and, critically, allows staff to defer tax until they realise a gain. In 2022, fresh amendments removed the "phantom tax" that once hit employees after they left a company. 

Together, these changes allow founders to issue equity with minimal friction, while employees can accept equity without fearing a surprise bill from the ATO. That alignment shows up every day in Carta's data and conversations with business leaders.

A culture of ownership 

Carta's recently released Startup Equity & Workforce Report - the first of its kind in the region - shows  the extent of Australia's pro-equity culture. It found that employees in Australian and New Zealand startups had an exercise rate of 51.8% last year, compared with the United States' rate of 32.2%. Founders here reserve a median 12.6% of fully diluted equity for Employee Stock Ownership Plans (ESOPs) - the highest in the Asia-Pacific region.

The main reason participation runs so hot in Australia is because liquidity is no longer theoretical. Company-led secondary programs at some of Australia's most successful startups have already minted hundreds of millionaires, proving to rank-and-file staff that options can translate into real wealth. 

That validation lifts financial literacy. Australian employees now time their exercises strategically to lock in capital-gains treatment, a level of sophistication that underscores the market's growing maturity. 

Outside of pure tech, the same mechanics are spreading to other industries.

However, ownership also comes with responsibility. For equity to be meaningful, companies must invest in ongoing education and transparent communication to help employees fully understand and feel confident in their role as co-owners.

Why equity trumps cash in 2025

Specialised talent is scarce, and most small businesses and startups can't outbid corporates on salary. Equity can help navigate that dilemma. By swapping part of a cash package for a genuine stake in the mission, founders conserve runway while giving hires a powerful retention hook. A pattern that's visible on Carta's platform is that when options move "in the money", voluntary turnover falls sharply, especially in tight labour markets.

For employees, ownership may be the most realistic path to generational wealth. Exercising early, before a big valuation hike, locks in concessional capital-gains tax treatment and converts today's effort into tomorrow's upside. This is an attractive proposition when traditional wealth pathways such as property feel increasingly out of reach. 

It's important to remember though, that an ESS can only work when well-designed. Clear vesting schedules, transparent terms and ongoing equity education are non-negotiable.

Looking forward 

While IPO and M&A windows come and go, growth-stage businesses can still offer liquidity by running company-led secondaries every time they raise primary capital. Because these transactions are initiated and governed by the company, they demonstrate a commitment to sharing upside along the journey - not just at exit. 

For businesses that may never raise external equity, a simpler alternative is an annual founder-funded share buyback. Even a modest annual budget can turn "paper wealth" into cash and keep the equity story credible.

Australia's ambition to build its next generation of successful companies depends on keeping talent engaged on-shore. Equity helps both create and recycle wealth, allowing today's engineers, sales leads and product managers to become tomorrow's founders and investors. 

When talent owns a real slice of the outcome, everyone wins. Let's keep the flywheel spinning.