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.

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.