Tax Breaks For Executive Share Options Under Consideration In Australia

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

24 October 2002

Immediately following an international furore over the corrupt actions of the 'fat cat' bosses of several multinational companies, and right in the middle of a domestic debate on whether top company executives are paid too much, could not exactly be said to be the ideal time to outline plans for allowing tax breaks on executive share options. However, according to an ABC News broadcast yesterday, that is exactly what Federal Treasurer, Peter Costello chose to do on Tuesday.

According to the national news provider: 'The Treasurer, Peter Costello opened another can of worms by suggesting the government might offer tax breaks for executive share options, which are estimated to be worth ten-and-a-half million dollars to each executive.'

Mr Costello reportedly explained that if such a measure is recommended by the International Accounting Standards Board, the government might consider allowing companies tax deductions for share options issued.

However, speaking to ABC on Wednesday morning, Shadow Treasurer, Bob McMullan condemned this proposal, arguing that: 'I think it's wrong and I think it's unfair. It's bad tax principle and I think Australians will believe that executives, at least in some part, are already excessively renumerated and there shouldn't be a reward for that happening.'

The Shadow Treasurer went on to explain that he is not opposed in principle to offering share options to executives, but believes that the process should be made public. However, he added that:

'Disclosure doesn't change the economic nature of the payment of the transaction, and therefore doesn't change whether it should be tax deductible or not. The tax principle is clear, they are not tax deductible now (and) they shouldn't be tax deductible after they're required to be disclosed.'

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