News & Media

Introduction How many times have you heard horror stories of non-contributing or under-contributing founders (Non-Performing founders) retaining a large equity stake in the company? Equally common are the stories of ‘simple’ fixes in the form of agreements to either: transfer the Non-Performing Founder’s shares (or a portion of them) at a nominal value to the remaining founder(s); or undertake a selective buy-back of the Non-Performing Founder’s shares (or a portion of them). However, both give rise to risks around the market value substitution rules and the tax rules

Introduction A premium priced option plan (PPOP) is not a legislative term, rather, it is a term used to describe an employee share option plan where the exercise price of the options is sufficiently above the market value of the underlying shares on the grant to deliver a nil market value for tax purposes such that: There is no discount provided in relation to the grant of the options; and, therefore there is no amount assessable to the employee participant under Division 83A of the Income Tax Assessment

The general tax rules relating to the taxation of an employee share scheme (ESS), or an employee share option plan (ESOP) are outlined in Division 83A of the Income Tax Assessment Act 1997 (General ESS Tax Rules). The General ESS Tax Rules are aimed at taxing participating employees on any discount they receive on the grant of an ESS interest (including shares or options in a company) either: upfront – in the income year of the grant; or subject to meeting certain conditions – at the earlier of