Employee share schemes consultation paper and draft bill

The Government has issued a consultation paper and draft legislation on the tax treatment of Employee Share Schemes following criticism of its Budget proposal.

The Government proposes to modify the Budget measure as announced to:

• raise the income threshold for the $1,000 tax exemption up to $150,000;
• introduce a limited deferral of the taxing point for schemes where there is a 'genuine risk of forfeiture', to protect employees who have a real risk of being taxed on a share or right that they might never get full title to;
• modify the taxing point ('deferred taxing point') for shares, stapled securities and rights;
• introduce an annual reporting requirement and associated withholding arrangements;
• review the existing valuation rules;
• modify the rules relating to the refund of income tax for forfeited benefits.

The Government proposes that these new arrangements will apply to shares or rights acquired on or after 1 July 2009. The existing law will apply to all shares and rights acquired before 1 July.

The closing date for submissions is Friday, 12 June 2009