Real cost scenarios — Australian startup candidate
Scenario 1 — The Division 83A income tax hit
Sarah exercises 20,000 options with a spread of $8 each. Her company doesn't qualify for the STSC. The $160,000 gain is taxed as ordinary employment income in the year she exercises.
$75,200 income tax bill
At 47% marginal rate. On shares she can't sell yet. Payable in cash at tax time.
Scenario 2 — The STSC difference at exit
John's options qualify for the STSC. When the company exits and he makes a $280,000 profit, he pays CGT at a 50% discount. Without STSC, the same gain is taxed as income at 47%.
$51,800 vs $131,600
$79,800 in completely avoidable tax — lost because nobody checked STSC eligibility before he signed.
Scenario 3 — The pay cut for worthless equity
Min-ho accepted a $40,000 salary reduction for "2% equity." Nobody modelled the cap table. After two funding rounds diluted his position, the startup needs a $500M exit for him to break even on one year of lost salary.
$40,000 salary gap
Per year. For equity that needs a unicorn exit to justify the trade.