THE EXEMPT SHARE PLAN - DETAIL

The Exempt Share Plan is similar to the plan prepared for the Department of Employment and Workplace Relations, referred to by the same name.

The Exempt Share Plan (ESP) provides a $1,000 per annum, income tax exemption provision under Division 83A. Under this plan, participating employees never pay tax on the $1,000 discount on the shares and pay only concessional CGT on any gain made on the sale of shares.

Legislative Basis of the ESP

The plan derives its tax effectiveness from tax concessions contained in Division 13A of the Income Tax Assessment Act, although this division imposes four limitations on plan design. Those limitations are:

• Free allocations are limited to shares worth $1,000 per employee per financial year.
• Offers must be made to at least 75% of permanent employees with at least 3 years’ service.
• No Employee may own more than 5% of the Issued Share Capital.
• The terms of allocation must be non-discriminating.
• There can be no forfeiture of share benefits (therefore, all shares vest immediately at the time of allocation.

Shares may be allocated to employees on the basis of:

• Free allocations;
• Salary sacrifice;
• Equal profit share;
• Equal matching (e.g. a one for one matching, by the employer contributing dollar for dollar (pre-tax) with the employee, is equivalent to a 50% tax deductible discount on the shares); and/or
• Equal profit share.