BALDWINS • FoodLegal

Australian Lawyers and Consultants

The Employee Share Scheme

September 2001

Division 13A provides a tax deferral or a discount on the taxable value of shares or options that are issued to employees under an Employee Share Plan.

However, if the value of the share or options increases over the deferral period, the employee becomes assessable on the Division 13A gain as ordinary revenue. As a result, the employee shareholder is precluded from claiming the 50% CGT discount on the gain. It may therefore be preferable in some circumstances for the employee to pay income tax upfront on the discounted shares received as opposed to taking the benefit of a tax deferral.

Another problem is that the 12 month holding period to qualify for the 50% CGT discount begins from when the shares are issued and may not be available if options (rather than shares) are issued and the options are not exercisable except just before either a sale of the company or some other trigger event that also forces a sale of the employee’s own shares.

For further information, contact Joe Lederman at BALDWINS, Australian Lawyers & Consultants.

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