Attracting talented people to help you build your company is crucial. The difficulty is that most startups lack the funds required to hire experienced people and so they need to look at other ways to entice them to join the company.
Equity is the most popular and possibly the best way to recruit the talent when a company doesn’t have the funds to employ them at market rates.
However, giving equity to employees can be complex and expensive under the current Australian taxation rules. The current regime means that if a company gives share options to employees, the employee will be taxed on the “value” of the option at the time of grant – even if the shares are in a startup that have potentially no value and are completely illiquid anyway
The Australian Government is reviewing, and is poised to make some big changes to the ESOP laws, making it easier for companies to use equity as part of a remuneration package for their employees.
We are watching this space very closely and with the LawPath ESOP Preparation Program you will be among the first to benefit from the government’s changes.
The ESOP Preparation Program is a monthly report on where the government is at with the changes and will set out what you should be doing to prepare to issue your employees equity. The September report sets out what alternatives are currently available to traditional (and highly taxed) employee options, including setting up a Loan Plan, a Phantom Plan or a Performance Rights Plan. We’ll describe the potential tax issues as well as the benefits and drawbacks of each. Maybe you shouldn’t wait until the government changes the tax laws.
In the following months when the changes take effect, we will give you the opportunity to be the first to use our documents to issue equity to your employees (additional charge for the ESOP documents).
If you would like more information about our ESOP Program please email: [email protected]