8 September 2025 | Incentivising employees and business owners/partners tax-efficiently | By Julian Cheng and Sophie Jiang from Gilbert + Tobin
- Description
- Curriculum
- Notice
- Reviews
Online via Zoom
This meeting will be held as an online-only event at the CTDG’s Zoom Webinar platform. Members should not attend the office of CPA Australia for this event. Please note that the CPA office will undergo a renovation during 2025.
TOPIC: Incentivising employees and business owners/partners tax-efficiently
This session will cover structures commonly used to incentivise/remunerate employees (including loan-funded share plans, options and employee share schemes) and owners of professional firms (including partnership and service trust structures commonly used by accounting/professional services firms). The session will involve practical case studies and discussion of the ATO’s views in respect of such structures.
SPEAKER: Julian Cheng | Partner | Head of Tax Group | Gilbert + Tobin
With over 25 years’ experience, Julian provides tax advisory services to the full spectrum of clients. His clients include public and private corporate groups, fund managers across various asset classes, consortiums and joint ventures and high net worth individuals.
Working across various transactions, he advises on mergers and acquisitions (including tax due diligence), initial public offerings, restructures, cross border investments, funding and fund establishment. Â
Julian has also represented clients in audits and reviews with tax authorities (including submissions to tax authorities). His advice covers matters including Division 7A, controlled foreign company rules, the superannuation guarantee charge, the characterisation of gains as revenue or capital in nature and withholding taxes.
SPEAKER: Sophie Jiang | Lawyer | Gilbert + Tobin
She advises on income tax and employment tax (superannuation guarantee, fringe benefits tax, pay as you go withholding and payroll tax) matters.
She has experience advising on the tax aspects of fund formation (for venture capital, private equity, cryptocurrency, debt and real estate funds), employee incentive plans and M&A (including public market, infrastructure, private equity, corporate, real estate and distressed transactions, as well as foreign investment into Australia).
Sophie advises clients across all sectors, including funds, corporates (public and private), family groups and foreign investors, providing assistance with tax structuring, tax due diligence, ATO early engagement and ruling requests, and the drafting of tax-related documentation.
Continuing Professional Development Point (CPD Point)
- This event will account for up to a maximum of 1.0Â CPDÂ Points per session.
- A completion certificate will be issued via LMS after the event for attendees who check in with our staff and who have attended the session for more than thirty-five (35) minutes. We are unable to issue a certificate unless we have a record of your attendance.
- Attendance records will be provided to CPA Australia, however, it is up to you to update your own CPD records/CPD Diary. We cannot update the same for you.
- You may wish to update your profile with us to include your CPA Membership number which we will report to CPA Australia accordingly.
- You should only claim for the attended hours only.
Attend via Zoom Webinar
- Our webinar will be provided via Zoom’s online Webinar platform in addition to the face-to-face meeting.
- You can listen to the webinar either via internet audio or phone dial-in. If you dial in via phone, please email us your details and phone number for attendance records.
- Zoom Webinars can be accessed on various platforms, including mobiles, tablets or laptops, etc. However, we will not be responsible for any costs incurred, such as internet charges in this regard.
- You can directly access the Zoom Webinar via our LMS, but we recommend the use of Zoom applications for a better user experience, please ensure that you only install/download the Zoom software from Zoom’s website/iOS App Store/Google App Store, DO NOT download the Zoom’s software from other sources.
- You will be automatically registered with Zoom, and you should receive Zoom’s registration confirmation email with the meeting details, no further registration is required. At the time of the meeting, simply click the link provided and the link will activate any pre-installed Zoom-related software and take you directly to the Webinar.
- Please note that we will never ask you for any password or personal information, please do not provide such information to anyone.
- To avoid last-minute technical issues, you should check if you are ready for Zoom.
- Any questions, please email us or reach us at citytaxation.com.au.
- We may not be able to resolve or attend to your needs during the webinar, but we will attempt to relay any questions to the presenter as soon as practicable.
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8 September 2025 | RecordingsWe note that our live Zoom webinar has been completed.
Please refer to the recordings.
Please note that some videos may be large in file size and may cause the video player to take some time to load. We have attempted to reduce the file size as much as possible.
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8 September 2025 | Attendance CheckThis quiz is set up as a final verification for the CTDG Convenors only. No action is required.
Summary
Employee Share and Option Plans
Julian explained the mechanics of employee share and option plans, highlighting how shares can be issued at market value or a discount, and options can be structured to have a nil market value. He detailed the tax implications under Australian law, noting that discounted shares or options are typically taxed upfront unless conditions for deferred taxation are met, such as vesting conditions and disposal restrictions. Julian also discussed the startup concession, which allows companies with specific criteria to issue discounted shares or options outside the employee share scheme rules, potentially offering tax advantages.
Employee Share Option Concession Plans
Julian explained the startup concession for employee share options, noting that it could apply to employees who hold less than 10% of the company, even if the options are exercised at a discount. Sophie discussed loan-funded share plans, which involve issuing shares at full market value using employer-provided loans, providing employees with upside potential without downside risk. These plans are particularly attractive when Division 83A conditions are not appropriate, and they offer flexibility in share classes and terms, such as ratcheting or flowering shares, often used in private equity contexts.
Tax Implications of Loan-Funded Share Plans
Sophie explained the tax implications of loan-funded share plans, focusing on Fringe Benefits Tax (FBT), Division 7A, and Capital Gains Tax (CGT). She highlighted that while Division 83A is not an issue, other tax considerations need to be addressed, particularly FBT for interest-free loans to employees and Division 7A for loans from private companies to shareholders. Sophie also discussed a potential solution to avoid Division 7A issues by structuring loans from Opco to employees who are shareholders of Holdco, as Division 7A only applies to loans from private companies to shareholders or their associates of the same company.
Loan-Funded Options and Professional Structures
Sophie explained the mechanics of loan-funded option plans, noting their similarity to loan-funded share plans but highlighting differences in FBT implications and CGT considerations. She emphasized that while loan-funded option plans are less common, they can be preferable in specific circumstances, particularly regarding CGT discounts. Julian then discussed professional practice structures, outlining regulatory frameworks and structuring considerations for different sectors, with a focus on companies as a common structure offering tax advantages and liability protection, while also noting the importance of understanding sector-specific rules and director duties.
Partnership Tax and Income Strategies
Julian discussed various business structures, focusing on partnerships and their flexibility in profit distribution, despite potential tax implications. He explained how partnerships differ from companies in terms of tax obligations and highlighted the use of service trusts to facilitate income splitting among partners and their families. Julian also touched on the ATO's guidelines for professional firm profits, emphasizing the need for commercially driven arrangements to avoid tax avoidance.
ATO Risk Assessment Framework Overview
Julian explained the ATO's risk assessment framework for professional practice structures, which evaluates profit allocation and tax rates across three factors to determine risk levels (green, amber, or red). He demonstrated the framework using a case study of a two-principal accounting firm, showing how the arrangement scored 8 points and fell into the amber zone due to the profit distribution and tax rate. The presentation concluded with guidance that practitioners should consider the regulatory framework before advising on structures, ensure commercial rationale for income splitting, and consult Julian or Sophie for further questions about management equity plans and professional practice structuring.
