Rudd Backs Down In Employee Share Tax Row

by Mary Swire, Tax-News.com, Hong Kong

26 May 2009

Australia's Rudd government has announced it is rethinking a controversial plan relating to employee share schemes after backlash mounted from businesses and unions.

The plan was unveiled as part of this month's federal budget, and would have ended tax concessions for share holders by requiring all employees with a salary of more than AUD60,000 (USD46,227) to pay tax up front on share options.

In response to the planned measure some businesses began shutting share schemes down altogether, and unions raised concerns over ordinary workers who could end up worse off as a consequence.

Facing the prospect of a large-scale revolt against the scheme, the government's Treasury officials met with tax experts on May 20 to settle the dispute. Assistant Treasurer Chris Bowen remarked:

"As part of that consultation process, we will be taking on board some of the concerns raised and examining the most efficient way of protecting the tax base and cutting down potential rorting at the higher end, while maintaining the current support for employee share ownership schemes, particularly for low- and middle-income workers."

Whilst no mention of completely eradicating the new measure has been announced, it is believed that the government will likely compromise on the issue by raising the threshold at which the tax exemption ends.

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