The Treasurer and Assistant Treasurer today released a Consultation Paper outlining the focus of the review of the tax treatment of employee share schemes (see our taxation update on "
The death of Employee Share Schemes").
The Consultation Paper has been prepared by Treasury who will be managing the review, and makes the following proposals:
- limit the $1,000 tax exemption to employees with an income of less than $150,000;
- enable limited deferral of the taxing point where there is a genuine risk of forfeiture of the shares;
- introduce annual reporting and withhold obligations on employers; and
- review the existing valuation rules.
Importantly, the government appears to have eased the severity of the measures announced as part of the Budget and the new measures which will apply from 1 July 2009.
This means the existing law, as contained in Division 13A of the 1936 Tax Act and not the earlier Budget announcements, continue to apply until 1 July 2009. This presents an opportunity for companies to continue to issue options and shares under existing plans until the end of the financial year.
The consultation process will be fast-tracked and public submissions on the Consultation Paper are due by 12 June 2009. It remains to be seen whether new legislation can be enacted before Parliament rises for its winter recess on 25 June 2009 which would provide certainty and a new scheme for employers by 1 July 2009. In the event that a new scheme has not been legislated by 1 July 2009, employers should exercise caution when issuing shares and options after this date as the tax treatment may be unknown.
Employers should continue to monitor the progress of the changes and discussion taking place and revamp existing plans once a new system has been introduced.
A key strength of the Hall & Wilcox
Taxation team is the size, depth and breadth of expertise, with a number of our people considered leaders in their field. Our advisers have combined legal and accounting tax expertise, with wide-ranging experience in 'Big 4' chartered accounting firms, the State Revenue Office, the Australian Taxation Office and on the Board of Taxation of Australia.
For further information, please contact: