While incentivising employees with equity can be powerful. It is not plug and play.

In this episode of Explain That by Velocity Legal, host Andrew Henshaw is joined by Edward Hart from the Commercial team and Archana Manapakkam from the Tax team to examine the commercial and tax realities of implementing Employee Share Schemes.

The discussion covers:

• Why businesses use Employee Share Schemes to align values and retain staff;
• The commercial risks of diluting control and issuing voting rights;

• How tax law treats equity issued at a discount;

• Upfront taxation versus deferred taxation under Division 83A;
• The real risk of forfeiture requirement;
• The startup concession and its strict eligibility criteria;
• Loan-funded share schemes and Division 7A considerations;
• The importance of shareholder agreements and good leaver/bad leaver provisions;
• Why documentation must align across tax and commercial frameworks

A practical overview for founders, growth businesses and established companies considering employee equity as part of a broader incentive strategy.

For tailored advice on Employee Share Schemes, structuring and tax strategy, contact our Commercial and Tax teams at www.velocitylegal.com.au.