Government wants to fix employee share schemes by raising thresholds

The Federal Government will propose raising the tax-free threshold on employee share schemes from $60,000 to $100,000 in order to placate business groups and unions angry at the Government’s proposed changes to the scheme.

The Government will release an options paper on the operation of employee share schemes today.

It has been heavily critcised over proposed changes to the schemes announced in the Federal budget. These changes would have meant any employee who takes part in a share scheme and earns more than $60,000 would have had to pay tax on shares or options granted.

According to a report in the Australian Financial Review, the Government proposes to boost the earnings threshold to $100,000 and tighten reporting and enforcement to crack down on tax payers rorting the system.

But the changes may not be enough to appease business groups and unions, who remain concerned that employees will be forced to pay tax upfront on shares or options they may never actually receive.

Currently, most employee share schemes around the country have been suspended or are under review, and the clock is ticking for companies who want to have share schemes set up in time for the 2009-10 financial year.

A tax counsel at the Institute of Chartered Accountants in Australia, Yasser El-Ansary, told the paper: “Boards of companies will find it difficult to make informed decision before June 30 about the future of their share schemes if they don’t have absolute certainty.”