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Peak Performance Trust vs Employee Share Ownership Plan (ESOP)

Employee Ownership

Peak Performance Trust vs Employee Share Ownership Plan (ESOP)

By , September 7, 2023
Peak Performance Trust

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/.

Craig West

Craig West

Executive Chairman | Succession Plus

Craig West is a strategic accountant with over 20 years of experience advising business owners. His background as a CPA in public practice has provided invaluable experience in the key issues of concern to business owners.

In March 2014, Craig was appointed Executive Chairman of the SME Association of Australia, Australia’s largest small business organisation representing over 300,000 business owners.

In October 2014, he was awarded the Exit Planner of the Year at the Exit Planning Institute Annual Conference in Texas, USA, due to his innovative development of an exit planning process to help business owners maximise business value and achieve a successful exit.

Craig’s proprietary structure - a Peak Performance Trust - has won the Australia-wide award for the Employee Share Ownership Plan of the year twice in four years.

In November 2018, Craig launched SME Experts in partnership with Mark Bouris’ Mentored on Podcast One and quickly grew the monthly podcast audience to over 26,500 downloads; in October 2019, he released a new podcast focused on medium-sized businesses - Mid-Market Matters.

In July 2021, Craig joined the NSW Committee for STEP (Society of Trust & Estate Practitioners) – focusing on advising families across generations.

Craig has also launched a SaaS platform, Capitaliz (which captures the 21-step process), to assist other advisers internationally deliver advisory services at scale.

In November 2021, Craig was appointed Executive Chairman of NSW Leaders, a business mentoring group for leading NSW businesses.

In July 2022, Craig West received the award of Doctor of Business Administration for his research thesis titled “Examination of the key factors driving business exit options in Australian Small and Medium Enterprises.”

Craig is passionate about encouraging business owners to think strategically, maximise the value of their business and achieve a successful exit.

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