Home – New Forums Starting your journey Creating New Shares in a Pty Ltd company

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    BarcodeExperts
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    When I set up my Pty Ltd company I created one share worth $1. Now I would like to create/issue more shares in order to share the business with other long term employees. My accountant tells me that the original one share is now worth a lot more money and that I can’t simply create more shares without incurring all sorts of tax issues on the issuing of these new shares. Surely there must be an easier way to do this. Can I split the original share into multiple shares worth an equal amount? Can I issue different classes of shares that aren’t valued the same way? Any suggestions out there?

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    James Millar
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    Your accountant may be correct.

    Fundamentally the capital gains tax provisions seek to tax events where there is a transfer of beneficial ownership of the asset. In the case of a small company issuing new shares, there are tax law integrity provisions in place to ensure transfer of the business is not effectively made via the issuance of new shares. It depends on the quantum of shares being issued (and the value they were issued at). It’s a complex part of the law and you definitely need specific advice before issuing shares. Given that you are considering issuing shares to employees you will also need to consider the employee share scheme provisions contained in Div83A (yes they apply equally to all size companies – sad but true). If there are any discounts to market value they will generally be taxed upfront as straight income.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
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