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27 Apr 10 Board of Taxation's review of employee share schemes released

In media release No 2010/073, issued 23 April 2010, the Assistant Treasurer, Senator Nick Sherry, announced the release of the Board of Taxation's report of its review into elements of the taxation of employee share scheme arrangements. The report is dated February 2010.

The Assistant Treasurer asked the Board of Tax to examine how best to determine the market value of employee share scheme benefits, and whether shares and rights under an employee share scheme that are provided by start-up, research and development and speculative-type companies should be subject to a tax deferral arrangement, despite not being subject to a real risk of forfeiture.

The Board's review makes 5 recommendations and includes a report by the Australian Government Actuary into the valuation of unlisted rights.

"The findings of the Board are consistent with the Government's employee share scheme reforms, and we fully accept four of the five recommendations and, in relation to a fifth, we partially accept it and will delay the consideration of one particular aspect to a later date," the Assistant Treasurer said.

On the use of set statutory valuation tables, the Assistant Treasurer said that the Board endorsed not using such tables for listed and unlisted shares, but supported the Government's decision to retain statutory valuation tables for unlisted rights.

"This decision, which gives taxpayers a simpler way to value unlisted options and rights, was endorsed by the Board, although the Board also recommended that the factors underlying the statutory valuation tables be reviewed and updated. The Government agrees that the methods underlying these valuations should be made more transparent but notes that the immediate application of the actuarial tables included in the report would increase the levels of tax on these types of interests. As such, we're not going to rush into this. We will talk to the affected community over the next twelve months and make any decisions on updating the statutory table in the context of the 2011-12 Budget, " said the Assistant Treasurer.


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