THE DEFERRED EMPLOYEE SHARE TRUST - DETAIL

The concept involves the establishment of a special purpose Deferred Employee Share Trust (DEST).  The DEST receives contributions or loans, from the Employer and purchases shares as fresh issues from the Employer or from other shareholders (e.g. from the ASX).

Under the qualifying tax deferred provision of Division 13A of the Income Tax Assessment Act 1936, investments offered must be shares in the Employer or a holding company. The share offers may be to selected Employees on differing terms, and must be subject to restrictions on sale or forfeiture. No tax limitation on size of allocations (i.e. subject to 5% issued share limit on individual allocations). There is no need to offer the shares to at least 75% of Employees, if general offers to at least 75% of Employees are made under the Employee Exempt Share Trust. And shares are tax deferred until the earlier of ten years, termination of employment, sale of shares or distribution of shares.

Shares may be allocated with vesting conditions, based on time and/or performance measures. These terms of issue should be consistent with the Employer’s particular remuneration strategies, underpinning the offer of participation in the DEST.

Income by way of dividends or other income may be declared and distributed from time to time. When benefits are to be realised, shares are sold or distributed to Employees and taxed as ordinary income.