Legend Geoff! This is fantastic. I posted on http://www.startup-australia.org/option-grants-in-australia so that we all can refer back to it in the future.
On Mar 31, 11:31 pm, Geoff McQueen - Hiive Systems <geoff.mcqu...@hiivesystems.com> wrote: > Hi Alan, > > Thanks for taking the time to reply - those two articles were up the right > alley and worth having a read of. > > Since last week's email, things have moved along well and I've got a good > plan in place with the team. > > For the benefit of people trying to do this stuff in the future, this is a > short version of what I've found: > > 1. Granting shares directly to staff means the recipient has to pay tax when > they're granted at their marginal tax rate. This isn't good for an > individual's cash flow. The alternative is fringe benefits tax paid by the > company, which is government endorsed extortion (now well above the top > marginal tax rate, which itself doesn't kick in until much higher up the > income scale than it used to). Options are less evil than shares in this > respect, but there's still some evilness. > > 2. One solution is to use a Unit Trust. In very brief terms, the trust is set > up separate to the employer, the company then lends money to the trust, > usually interest free, and the trust then buys stock in the company. By > issuing new stock, the company doesn't have a CGT issue to deal with (since > you're not really selling existing shareholders pieces of pie, but instead > growing the pie). The employees are then allocated units in this trust which > are effectively stapled to the shares that the trust holds for them. > Employees then, through the trust, own the shares from day one, but they're > subject to a loan. You can pay dividends to the employees from day one also > (not that the tech types reading this list are likely to focus on dividends). > > 3. Employees can then have the 'loan' owed by the trust on their behalf paid > down gradually through bonuses/vesting conditions and the like. > > 4. When it comes time to sell the shares - because of a trade sale, other > liquidity event or because the employee wants to sell them once they're paid > down and they've vested - the value of the share at the issue price is taxed > as if it were normal income (i.e., subject to marginal tax rates). The > capital gain is taxed as CGT, and if they've held the asset for more than 12 > months - which they bloody should have if you're making them vest - then they > get the concessional CGT tax rate (effectively 25% of the capital gain value > is then taxed as if it were normal income I believe). The important part of > this principle is that they don't pay tax until they've got cash in their > hands. > > 5. The costs for setting up the trust are tax deductible, including the costs > associated with professional advice on its configuration and rules. > > 6. The costs for running the trust are also tax deductible. > > 7. You can get a private tax ruling on the trust and the scheme to ensure you > don't get surprises later. > > There are a bunch more models that are a variation on this that you can do > too. If you're going to issue stock without vesting limits, and if you're > going to issue is to more than 75% of your staff on a fairly homogenous > basis, then you can issue $1000 per annum worth of shares completely tax > free; that model is covered in the attachment too. > > I've been getting some good advice on this from John Day at the > Melbourne-based Remuneration Strategies Group. Attached is a bit of an > overview of the different types of plans that they were commissioned to put > together by the Federal Government for just this sort of challenge. As with > all things, it's just a starting point, but I found the summary pretty > valuable. > > Hope this helps someone else down the track... if I'd had this PDF months > ago, it would have saved me a lot of grief. > > Geoff > > > > -----Original Message----- > From: silicon-beach-australia@googlegroups.com > [mailto:silicon-beach-austra...@googlegroups.com] On Behalf Of mmp1 > Sent: Thursday, 26 March 2009 1:51 AM > To: Silicon Beach Australia > Subject: [SiliconBeach] Re: Advice/Experience Request: Employee Share/Option > schemes > > Geoff, > > i found these interesting also : > > http://www.mallesons.com/publications/2008/Nov/9710401W.htm > > http://www.mallesons.com/publications/2008/Dec/9722927w.htm > > Alan. > > > > RSG ESP & SOP.PDF > 3538KViewDownload --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Silicon Beach Australia mailing list. No lurkers! It is expected that you introduce yourself: http://groups.google.com/group/silicon-beach-australia/browse_thread/thread/99938a0fbc691eeb To post to this group, send email to silicon-beach-australia@googlegroups.com To unsubscribe from this group, send email to silicon-beach-australia+unsubscr...@googlegroups.com For more options, visit this group at http://groups.google.com/group/silicon-beach-australia?hl=en?hl=en -~----------~----~----~----~------~----~------~--~---
