Peak Performance Trust vs Employee Share Ownership Plan (ESOP)

When it comes to deciding between a Peak Performance Trust and an Employee Share Ownership Plan (ESOP) for your company, it is essential to understand the differences between the two to make an informed decision.

To begin with, a Peak Performance Trust is a type of equity-based incentive plan that rewards employees based on the company’s performance.

There are benefits associated with both options, but also some potential downsides to consider. For instance, a Peak Performance Trust has the potential to motivate employees to work harder and achieve better results. It also gives companies more flexibility in terms of how they distribute rewards, as they can choose how much to contribute to the trust each year. The Peak Performance Trust uses very generous ESS tax concessions to enable the employee to defer tax on income they receive as a contribution to the share plan – This tax treatment is supported by ATO rulings – https://succession.plus/esop/ppt-private-rulings/

The Peak Performance Trust has been designed specifically for Australian privately owned companies and is the most flexible plan available in the market – for example:

The employee can own shares through an associate – a family trust is most common.

One of the key benefits of the PPT is the flexibility of funding- the plan allows for various funding options to allow employees to buy or earn shares. The plan can be funded through at least five different methods –

• $1,000 tax-exempt per employee per annum,
• $5,000 salary sacrifice per person per annum,
• Employee buy-in,
• Employee earn in ( profit share contribution by employer )
• Gifting – The employer can make a gift of equity to fast-track the plan or to reward a specific employee or group of employees.

In summary, the PPT offers employees a sense of ownership and pride in the company’s success. By becoming shareholders, they have a vested interest in the company’s performance and are more likely to work towards its success. Additionally, a PPT can provide tax benefits for both the company and the employees.

For further information on Peak Performance Trusts, please refer to https://succession.plus/white-paper/ppt-overview/.

Dr Craig West

Founder & Chairman | Succession Plus

Dr Craig West is a strategic accountant who has over 20 years of experience advising business owners.

With a background as an accountant in practice and two master’s degrees, Craig formed a strong view that the majority of business owners (and often their advisers) were unprepared and unaware of the steps required to prepare for exit. He then designed and documented a unique 21-Step Business Succession and Exit Planning process to assist owners and their advisers in navigating this process.

Craig now acts as a strategic business and financial mentor for mid-market business owners. Craig has written four critically acclaimed books educating business owners on employee incentives, succession planning, asset protection, and exit strategies. Additionally, he has completed doctoral research on Employee Share Ownership Plans (ESOPs) for succession.

Craig is a Member of the Forbes Business Council where he leverages his extensive experience to contribute valuable insights on helping business leaders navigate the complexities of growing and exiting their businesses.

In April 2024, the Exit Planning Institute admitted Craig to the International Exit Planning Circle of Excellence.