Free Consultation
Book a Free Consultation
A certified valuer will listen to your situation and answer any questions you may have, at no cost.
Every grant carries two values, one for the employee's tax and one for the company's accounts, and every priced round implies an ordinary share value that sits below the preference price. We work out all of them before the terms are signed.
Indicative valuations from A$799. Certified Summary and Detailed reports from seven business days.
A Melbourne company granting shares or options to staff needs a Division 83A market value for the employee's tax and a separate AASB 2 grant-date fair value for its own accounts. When it raises capital, the same analysis allocates the round price across share classes, prices the ordinary shares and builds the evidence file for ESIC eligibility.
Melbourne's employee equity work sits where its growth companies do: options at a software business in Cremorne, a loan-funded share plan at a family manufacturer in Dandenong South, shares issued to research staff at a medtech spin-out in the Monash precinct at Clayton. Whatever the form, the moment the company hands over equity, two separate tests start running. Division 83A of the Income Tax Assessment Act 1997 taxes the employee on the discount, measured against market value. AASB 2 requires the company to record an expense equal to the award's fair value on the grant date. The dates differ, the bases differ, and so, usually, do the numbers.
Companies that reuse one figure for both purposes pay for it twice. Understate the market value and the employee's return is corrected by the ATO, with the company exposed for inaccurate ESS reporting. Get the grant-date fair value wrong and the profit and loss is misstated across the whole vesting period, which an auditor finds at the first audit or an investor's advisers find in due diligence before the next round.
A raise sharpens all of this. Once a Docklands scale-up closes a priced round, the round price becomes the anchor for every grant that follows, yet the investors hold preference shares with rights the ordinary shares do not carry. Set the option exercise price at the preference price and the company is either overpricing its options or defeating the start-up concession it is counting on, and nobody notices until the ATO or the auditor asks for the working.
We produce both values as separate, documented conclusions for founders, boards and their advisers, from the technology cluster along the Yarra to the established private companies of Melbourne's east and south-east. If the evidence does not support the position the company wants to take, we say so before the grant letters go out.
A certified valuer will listen to your situation and answer any questions you may have, at no cost.
Division 83A settles when the employee is taxed and on what amount. AASB 2 settles how much expense the company recognises and across which years. Trying to serve both with one calculation gives a figure that is wrong for at least one of them, and frequently for both.
The employee's assessable discount is the market value of the interest less whatever they paid for it. Unless the scheme qualifies for deferral, tax falls in the year of acquisition. Where deferral applies, the taxing point moves to the date the real risk of forfeiture and any genuine disposal restriction lift, capped at fifteen years. Either way, a supportable market value has to exist for that date.
Under Subdivision 83A-33 an unlisted, Australian resident company incorporated less than ten years ago, with aggregated turnover that does not exceed $50 million, can grant equity without upfront tax for the employee. The price of that relief is a limit tested on the grant day: a share discount no greater than 15 per cent of market value, and an option exercise price no lower than the market value of the underlying share. Both tests need a value that existed on that day, not one reconstructed later.
An equity-settled award is valued once, at grant, and that value is spread over the vesting period regardless of what the share price does afterwards. Cash-settled arrangements, phantom shares among them, are revalued at each reporting date. Service and non-market performance conditions are handled through the estimate of awards expected to vest and reverse if they fail. A market condition such as a total shareholder return hurdle is priced into the grant-date value and the expense stands even when the hurdle is missed.
The ESS statement to each employee is due by 14 July and the ESS annual report to the ATO by 14 August, and both are built on market value figures. Separately, under the Payroll Tax Act 2007 (Vic), shares and options granted to employees count as wages, and the SRO takes the value on either the grant date or the vesting date according to the employer's election. For a plan with staged vesting that is often a third valuation date for a single award.
Qualifying start-ups can use the ATO's safe harbour methods: a net tangible assets calculation for shares, and for options a table keyed to share value, exercise price and remaining term. The certainty is worth something. The figure, though, can sit a long way from what the equity would sell for, and where the safe harbour is unavailable or plainly unrealistic, market value is set under general principles, as the price a willing and informed buyer and seller would strike at arm's length with neither under any compulsion.
An unlisted company is valued first as a whole, using the income and market approaches, or by reference to the last arm's length round where it is recent and nothing material has moved since. Value is then split across the classes on the register. A liquidation waterfall pays each preference in order and suits a company within sight of an exit. The option pricing method models every class as an option over the enterprise, with the preference amounts as strike prices, and a backsolve calibrates that model to what the last investors paid. For a Richmond scale-up fresh from a Series A, the backsolve is normally the most defensible route to an ordinary share value.
Options and performance rights then go through an option pricing model. Black-Scholes serves a plain option with a fixed exercise price. A binomial lattice copes with early exercise and staged vesting. Monte Carlo simulation is needed once a market hurdle or any path-dependent payoff enters the terms. Because an unlisted company has no trading history, the volatility input is the one an auditor tests first, and we construct it from a documented peer group of listed companies matched on industry, size and gearing, measured over a window that matches the expected life of the award. A loan-funded share plan, where the employee buys shares with a limited-recourse company loan, is economically an option and is valued as one regardless of its legal form.
At a capital raise the same work answers the founders' questions. What does the headline pre-money figure really mean once the option pool is carved out before the money lands, the convertible notes and SAFEs convert at their discount or cap, and the preference stack ranks ahead of the ordinary shares? What is one ordinary share worth on the grant date? For the early stage innovation company offset, the company must pass the early stage test and either the 100-point innovation test or the principles-based test at the time of issue. Whether it passes is a tax question for your adviser; we supply the market sizing, scalability and competitive-advantage evidence the principles-based limbs require, prepared at the time and kept on file. Where a bank is part of the funding, a lender-facing valuation covers enterprise value for facility sizing, the assets offered as security and the headroom on proposed covenants.
None of these is visible on the day of the grant. They appear when an auditor, an incoming investor or the ATO asks for the working, and by then the terms are fixed.
Share scheme and raise valuations are nearly always read by someone outside the company: the auditor testing the AASB 2 charge, the ATO checking the ESS annual report or the start-up concession, or an investor's advisers at the next round. A certified report is therefore the usual choice. An Indicative valuation earns its place earlier, while the plan is still being designed and the terms are open.
Each conclusion in the report is tied to its framework, the valuation date that framework demands, the standard of value and the information relied on. The report walks through the whole-of-business valuation, the allocation across classes, the model selected for each award and the reason for it, every input with its source, and how sensitive the result is to the inputs that drive it, usually volatility and expected term. Where the Division 83A and AASB 2 figures part company, the report explains why, so your tax adviser and your auditor are working from one document.
A certified valuer signs every report and will take the auditor's questions directly, defend the peer group and the model choice, and stand behind the conclusion if the ATO or a later investor tests it. We work with your tax adviser, the lawyers drafting the plan rules and your auditor from the start, because a valuation produced in isolation from them usually has to be done again.
When the auditor questions the volatility input and the ATO questions the exercise price, will the same working paper satisfy both of them? Until it can, the grant should wait.
Talk your situation through with a certified valuer before you commit to anything, at no cost.