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Australian Government backs down on share schemes

Posted on July 27, 2009

The Australian government caused consternation in May with new proposals for taxing employee share schemes. However it has recently back-tracked considerably.

The main outcry was in relation to a proposed tax on the grant of options or other share rights at a discount to market value. In most countries, any tax on the value of an option is deferred until it is actually exercised. Initially, the Australian government proposed to offer exemptions to the upfront tax to those earning less than $A60,000, but now proposes to raise this threshold by three times to A$180,000. This is also the top income tax threshold.

There are still some unresolved issues. The first is to determine the fair value of the benefit, and whether there should be special treatment for employees of startup and research and development companies. A deadline of 28th February 2010 has been set for the resolution of these issues.


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