Private Binding Rulings on Peak Performance Trusts

Generous tax concession for ESOPs: tax deductible contribution for the employer business, no tax in the ESOP and tax deferral for up to 15 years for employees

In July 2015, new rules covering the taxation treatment of Employee Share Ownership Plans (ESOP) and Employee Share Schemes (ESS) were introduced, changing some existing taxation rules, unwinding some of the “poor” changes made in 2009, as well as introducing new concessions for employees of start-up companies. The changes applied to a group of plans which cover ESS interests (including shares, stapled securities, options and rights to acquire those on or after 1 July 2015).

The key changes to the existing rules were to extend the maximum deferral to 15 years for tax-deferred schemes, change the significant ownership test and allows a tax refund for rights received but not exercised, in certain circumstances.

In addition, new eligibility criteria (generous criteria which covered a large number of SMEs) for the start-up concessions allowed for the discount provided for eligible ESS interests to be untaxed. And finally, a new simplified “safe harbour” valuation regime was introduced to allow for easier and quicker valuation of unlisted shares.

Since 2015, we have worked with over 100 companies on Employee Share Ownership Plans (mainly using our proprietary Peak Performance Trust) and have tax rulings (the most recent in September 2020) which confirm the following taxation treatment:

• Deductibility of employer contributions to the PPT
• No FBT, payroll tax, SGC or workers compensation to apply.
• No taxation payable by the Employee Share trust
• Deferral of income tax by employees for up to 15 years – the earlier of;
  • completion of employment (including good leaver, bad leaver and special circumstance conditions)
  • an exit event (sale, merger or listing of the employer)
  • 15 years (which is the maximum deferral allowed)

To find out more about our taxation treatment and to review the ATO ruling documents, download our Technical Guide to ESOPs.

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.