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An opportunity to readdress employee share plan changes

Publication date: 26 May 09 | Source: THE TAX INSTITUTE

Australia’s premier professional tax body, the Taxation Institute of Australia, welcomes the Government’s decision to reconsider its policy approach to countering problems it perceives with employee share schemes, as outlined in the 12 May 2009 Budget.

President of the Taxation Institute, Joan Roberts, believes that this decision is an opportunity for the Government to ensure that its policy will maintain the current support for employee share ownership schemes, particularly for low and middle income workers. It should also foster productivity and the alignment of corporate and employee objectives, and, through active enforcement, deal with the problems of evasion.

”The approach adopted in the Budget had the impact of shutting down schemes without addressing the fundamental problems perceived by the Government of evasion and over use of the discount concession by high earning taxpayers.”

“Whilst it’s great that the Government is looking at ways to improve their approach to employee share schemes” said Ms Roberts, “there remains too much focus by the Government on a legislative response to the problems of post vesting evasion.”

“The evasion problem should be addressed through targeted funding of the Australian Taxation Office to use its already extensive information gathering powers to identify and deal with non-complying taxpayers” she said.

“Deferral of the taxing point needs to be restored, as to demand payment up front for gains which may never materialise, undermines the very fabric of employee share plans.  It is essential employees are in a position to sell shares to cover their tax liability. Otherwise, the risks associated with investment will be untenable in the current volatile market and the underlying policy objective of encouraging an alignment of the interests of companies and their employees through continuing share ownership by employees will be discouraged.”
“The Taxation Institute also recommends the Government abandon the announced $60,000 income threshold for accessing the $1,000 tax exemption as it is too low and is inconsistent with the income thresholds of a number of recent tax measures, such as the tax bonus and the proposed paid maternity leave” said Ms Roberts. “It is important to encourage participation in employee share plans across the workforce” she added.

 “The Taxation Institute believes the Government can address these crucial issues in its review of its policy approach to employee share schemes if it consults widely with business, the tax profession and the community”, concluded Ms Roberts.

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View the Taxation Institute’s submission to the Treasury

Media Contacts:

Joan Roberts, President - Taxation Institute of Australia on 0419 308 141
Dr Michael Dirkis, Senior Tax Counsel - Taxation Institute of Australia on 0417 400 349