The Federal Government has backed down on its controversial changes to employee share schemes, ordering a review of the schemes that it hopes will placate employer groups and unions who criticised the Government’s Federal budget crackdown.
Federal Treasurer Wayne Swan told ABC radio this morning that he accepted the Government may have got its share scheme crackdown wrong on budget night.
“Look, I certainly think mistakes have been made in this area. I accept responsibility for that. And the common sense thing to do in this situation is to go out and consult and get it right.”
“We are 100% committed to the central purpose of this measure, which is to stop these schemes being rorted particularly by people on very high incomes. But a number of points have been made to us by the business community and others, and it’s just common sense to acknowledge some of the points they have made.”
Under the Government’s original proposal, employees earning under $60,000 would no longer be able to defer tax on shares or options that had been granted and would be forced to pay the tax upfront, regardless of whether they actually exercised the options or received the shares.
Swan acknowledged that the $60,000 cap was too low, but refused to speculate on whether this level would be raised.
Federal Treasury is expected to examine ways of cracking down on tax avoidance by strengthening reporting measures. This could include legislating for greater disclosure through individual income tax returns.
While Assistant Treasurer Chris Bowen said the Government would fast-track the review, business groups are demanding urgent action. A number of companies have suspended or are reviewing their share schemes and are demanding certainty before the new financial year starts and new pay arrangements are brought in.
“There would have to be a really strong announcement in the next two weeks to allow companies to proceed before June 30,” tax partner and Blake Dawson, Duncan Baxter, told the Australian Financial Review.
Otherwise, companies may be forced to suspend their share schemes for 2009-10 and re-start them 12 months later.
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