25 May 09 Employee share schemesIn a media release issued on 24 May 2009, the Assistant Treasurer, Chris Bowen, outlined the key principles that will underpin the consultation process on the Budget measure that deals with the taxation arrangements surrounding employee share schemes.
The Budget measure was designed to deal with the current tax arrangements applying to employee share schemes which involve excessive concessionality and provide scope for revenue losses through avoidance or for confusion as to the taxpayer's obligations. Concerns have been expressed that the $60,000 income cap for access to the $1,000 tax exemption is too low. Concerns have also been expressed about the removal of the tax deferral option for higher value schemes.
The Government will be fast-tracking the consultation process, beginning with the release of a policy options paper in the next fortnight. The paper will canvass options that include:
- the reporting requirements which should be applied to address tax avoidance concerns, such as the application of withholding arrangements or enhanced Tax File Number (TFN) reporting
- the level of the income threshold for accessing the $1,000 tax exemption for upfront taxation, which would ensure the continued availability of employee share schemes for low and middle income employees
- whether there are circumstances under which it may be appropriate to provide for the deferral of taxation, the period of deferral and what those limited circumstances would be (such as when there is a real risk of forfeiture), and
- whether the tax law provisions which determine the market value of discounted and deferred shares or rights result in undervaluation.