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Australian Employee Share Scheme Tax Changes Passed

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

04 December 2009


The Australian parliament has passed legislation amending the tax laws in relation to hobby farms and non-commercial losses, as well as employee share schemes (ESS), which should result in an additional AUD835m (USD770m) of additional revenue in the annual budget.

The bill tightens the rules around hobby-farms and other non-commercial losses. Individuals with an adjusted taxable income of AUD250,000 or more will be unable to offset deductions from non-commercial business activities against their salary, wage or other income, unless they have applied to the Commissioner of Taxation, and the Commissioner has assessed the activity as genuinely commercial.

The existing rules, however, remain in place where individuals have an adjusted taxable income under AUD250,000. It is expected that this measure will add AUD700m to forecast budget revenue.

The taxation of ESS has also been reformed to improve corporate governance, target eligibility for the tax concessions, and reduce opportunities for tax avoidance.

Employers will be subject to reporting requirements; only employees with an adjusted taxable income of less than AUD180,000 will be eligible for the upfront tax exemption; and there will need to be a real risk of forfeiture for shares or rights over which tax is being deferred. This measure should contribute AUD135m to budget revenue over the forward estimates, according to the government.

"These laws deliver a higher level of integrity to our tax system by ensuring everyone is paying their fair share of taxes, which is in line with the government's commitment to make sure our tax system applies fairly and equitably to all Australians," concluded Australia’s Assistant Treasurer, Nick Sherry.


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