Deferred Employee Share Plan

The Deferred Employee Share Plan (DESP) is designed to comply with Income Tax Assessment Act 1997 (ITAA), Subdivision 83A-C, and in particular Section 83A-105 (4).

The benefit this plan accesses enables participants, while still employees of the organisation (or a holding company or subsidiary of the organisation), to defer the income taxation on their share-based remuneration benefits for up to seven years. In the financial year in which the shares are withdrawn from the plan the participant's taxable income will increase by the value of the shares at the time of withdrawal, (or sale within 30 days of withdrawal). Additionally, this benefit is not subject to fringe benefits taxation (FBT).

To access the DESP taxation concession a number of conditions must be satisfied. In brief the main conditions to be considered are:

The shares must be the 'ordinary' shares of the organisation or a holding company of the organisation.
The value of the share benefit is limited to $5,000 per tax year.
There is no minimum holding term limit.
The non-discriminatory rule, explained under the Exempt Employee Share Plan conditions (see Exempt Employee Share Plan), can be satisfied by a previous offer or through an offer under another plan.
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.

The DESP is a valuable benefit to all employees, and allows for flexibility in taxation planning through deferral in years of high income and withdrawal from the plan during years of low income.

In general, the main advantages of the DESP are:

It is simple and easy to understand;
It enables more meaningful ownership levels;
It can be used for restricted share offers with forfeiture conditions and conditions specific to each offer; and
It is easily adaptable to changes in circumstances.

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