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Employee share schemes Explained
Employee share schemes are made for employees. Alternatively they are called employee share purchase plans or employee equity schemes. These share schemes let employees buy shares in their companies.

Employee share schemes can sometimes let employees buy shares via employer loans, salary sacrifice over a period of six months or dividends from their shares.

There is employee equity schemes that let workers buy shares in full. These sorts of schemes will only give employees rights to share ownership or equity investment if the company is large. Smaller companies can only provide employee share schemes that pay dividends.
Buying these share plans can be very advantageous particularly in attracting, motivating and retaining your staff. When employees get their dividends they will benefit more and become more motivated.

These shares might have some tax benefits too, depending on an employee’s financial status. As well, there may not be a brokerage fee when joining the employee share schemes.

http://www.bottrellaccounting.com.au/employee-share-schemes-explained/



Increasingly, companies are turning to Loan Funded Share Plans as an alternative arrangement for rewarding their employees with equity.

07 May 2013

*** Increasingly, companies are turning to Loan Funded Share Plans (LFSP) as an alternative arrangement for rewarding their employees with equity.  Like options, LFSPs enable the employees to share in the capital growth of the company, but without the tax issues that can plague options.
The structure of a LFSP is relatively simple. The employer makes an interest-free limited recourse loan to enable the employee to acquire shares in the employer for market value.  The limited recourse feature of the loan means that the employee is protected from downside risk if the value of the shares falls below the outstanding loan balance.

The shares granted under a LFSP will ordinarily be held by a trust operated by the employer to give the employer greater control over the shares prior to vesting. Dividends paid in respect of the shares will typically be applied to pay down the loan.
Employers can make participation in the arrangement subject to the usual vesting conditions, performance hurdles and forfeiture conditions like any other share or option plan.
If structured correctly, there is no taxing point for employees on vesting, unlike in the case of options.  The employer also does not have any reporting obligations to the ATO and the employee that would otherwise arise if the arrangement was subject to the ESS Rules.
An employee only needs to pay tax when they ultimately sell their shares.  Importantly, this means that the event that triggers the taxing point also generates the means (ie cash) to help pay that tax liability.
Moreover, any gain made on the shares is only subject to tax as a capital gain, so only 50% of the gain is subject to tax, provided the shares have been held for at least 12 months.
Given the benefits of LFSPs, it is no surprise that we are seeing more of these types of plans in the market.
Of course, there are variants of the arrangement described above and the features of each employee equity arrangement need to be considered in order to appropriately consider the tax implications of the plan for the employee and the employer.  As LFSPs are becoming more prevalent and arrangements are ‘tweaked’ to achieve certain (and hopefully) optimal outcomes for employees and the company, we are seeing features of these arrangements, from time to time, that give rise to unintended tax outcomes...

All of it:

http://www.hallandwilcox.com.au/news/Pages/Taxation-Update-060513.aspx



What are the benefits and downsides of employee share schemes?

https://legalvision.com.au/benefits-downsides-employee-share-schemes/