Have a problem would like people's opinions on.
Business structure is ABC PTY LTD ATF DEF Family Disc Trust. Currently employ people on hourly rates through ABC PTY LTD.
I would like to offer senior management and long term employees the opportunity to 'share' in a percentage of NPAT generated by the company each year. The formula for their remuneration would change from hourly rates to an annual salary (so cost can be better managed) plus the agreed percentage of NPAT. For me this has 2 purposes. Firstly to offer long term reward reward to key staff who have helped me (and continue to) build the business, and secondly I believe it will be a significant driver of NPAT going forward as these staff now have 'skin in the game'.
The dilemma - how can I distribute after company tax has been paid but before profits are distributed by the trust. As employees the staff are not beneficiaries of the trust and will be taxed at the highest rate by the ATO if the trust distributes to them.
At this stage I'm thinking performance share 'ownership' by the employees with a deed of agreement between them and the company as to NPAT distribution. Just interested in other people's thoughts. I have also raised with my legal provider and waiting for answers / options. Staff are very interested in the idea but want to know how it might work.
