The Government announced significant changes to the taxation
treatment of employee share schemes effective from 7.30pm on
Tuesday 12 May 2009.
Under the arrangements announced in the 2009 Federal Budget ,
all discounts on shares and options provided under an employee
share scheme, either qualifying or non-qualifying, will be assessed
in the income year in which the shares or options are acquired.
Employees acquiring shares or options under qualifying employee
share schemes will no longer be able to elect to defer the taxation
of their discount to a later time and must include the value of the
discount in their income tax return in the year of grant of the
option or share.
The Government will also limit access to the $1,000 upfront
concession. The $1,000 upfront tax exemption will be limited to
those employees with less than $60,000 of adjusted taxable income
(i.e. taxable income plus reportable fringe benefits, salary
sacrifice arrangements and net investment losses).
The proposed changes will not affect shares or options already
held by employees.
Under the current arrangements, employees who take part in
employee share schemes are required to pay tax on the difference
between the amount they paid for the share or option and the value
of a share or option they receive from their employer. This is
currently the case in relation to both qualifying shares schemes
and non-qualifying share schemes.
An employee in a qualifying share scheme can elect to have the
discount assessed either:
In the income year the shares or options are acquired. If so,
the employee can access an upfront tax exemption of up to $1,000 on
discounts received each year.
In the year in which the share ownership becomes
An employee in a non-qualifying scheme will be taxed on the
discount when he or she acquires the shares or options. This means
they do not enjoy the tax benefits associated with qualifying
employee share schemes. There is no $1,000 discount applicable to
non qualifying share schemes.
Employers will need to reconsider the structure of all existing
share and option plans and consider alternative remuneration
Employees will need to consider the effectiveness of an
investment in an employee share scheme.
Moore Stephens will be lobbying the Federal Government to
overturn the proposed changes as the revenue gain to the
Commonwealth is not significant ($10 million in 2009/10, $90
million in 2010/11, $60 million in 2011/12 and $40 million in
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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