Means test lifted to $180,000 under share scheme changes
July 6th, 2009
The Federal Government will lift the annual income threshold to $180,000 for employees to receive tax-free grants of up to $1000 in shares, in what it says are the final changes to the new tax regime for employee share schemes announced in the May Budget.
The softening of the Budget measures, announced last night, aligns the income cap with the top marginal tax threshold, according to Assistant Treasurer Senator Nick Sherry. The Budget measures had set the income cap at $60,000.
The Government will also axe the requirement to pay tax upfront on shares employees have been granted where there is a “real risk of forfeiture”.
Treasury provides a number of examples of forfeiture risk in the policy statement released yesterday, such as “Matt’, who makes an arrangement with his employer to receive 1,000 shares if he is still employed in three years time. “Matt” is entitled to defer tax for three years, or until he ceases employment with his employer.
“Amy” makes a deal to receive 1000 shares in 12 months if her company’s market share increases. “Amy’s hares are a t risk and she will defer tax for the year”, the statement says.
Among other changes, the Government will allow employees to defer tax on up to $5,000 of shares under “particular” salary-sacrifice based employee share schemes, where there is no real risk of forfeiture.
The Government has shelved the requirement for employers to report the market value of employee share schemes in the year they are granted, if that doesn’t coincide with the year when the employee is taxed.
Senator Sherry will ask the Board of Taxation to consider two outstanding matters:
- how to calculate the market value of employee share scheme benefits; and
- whether shares and rights provided under employee share schemes by start-up, R&D and speculative companies should be able to be deferred, despite there being no real risk of forfeiture.
www.workplaceexpress.com.au Thursday 2nd July 2009