Exempt Employee Share Plan

The Exempt Employee Share Plan (EESP) is designed to comply with Income Tax Assessment Act 1997 (ITAA), Subdivision 83A-B, Section 83A-35.

This enables employees on adjusted taxable incomes of up to $180,000 to receive up to $1,000 discount benefit, income taxation free, in shares in their employer each financial year. Any subsequent increase or decrease in the value of the shares is treated as a taxable capital gain/loss in the financial year the shares are sold. In addition, the discount benefit is not subject to fringe benefits taxation (FBT). To access the EESP taxation concession a number of conditions must be satisfied. In brief, the main conditions to be considered are:

Shares must be the 'ordinary' shares of the organisation or a holding company of the organisation.
The taxation concession is limited to a maximum of $1,000 per financial year.
The employee must hold the shares in the plan for three years while still employed by the organisation.
There can be no forfeiture conditions within the terms of the offer. If the employee leaves the employ of the organisation (or a subsidiary or holding company of the organisation) the employee retains the shares.
Each offer made must be non-discriminatory. In general, the non-discriminatory clause is considered satisfied if the offer is made on a similar basis to 75% or more of the staff with three years or more service.
Taxation benefits are not available to a participant in the plan who holds or controls more than 5% of the shares or 5% of the number of votes that may be cast at a general meeting.

In general, the main advantages of the EESP are:

It is simple and easy to understand.
It benefits general employees.
Although limited to $1,000 it offers a great taxation benefit.
It is easily adaptable to changes in circumstances.
It can benefit all levels of income if support is provided by the company.

Should you wish to discuss any aspect of the EESP, or employee equity ownership in general, please contact OTA.