Advice firms should not count on Government review of employee share plans

A number of financial services companies, including advice firms, could have to review their employee share options for next year in line with the Federal Budget provision, despite the Government back-tracking on the provision.

Remuneration Strategies Group director Gary Fitton said this could be the upshot of the decision by the Government yesterday to review the provision but not revert to the status quo that existed before Budget night earlier this month.

The Government announced yesterday that it would review the Budget provision requiring people to pay tax upfront on shares they receive from their employer rather than defer tax until the shares are sold.

It said the review would also consider the proposal in the Budget to impose an income cap of less than $60,000 per year on a tax exemption which has covered up to $1,000 worth of employee shares a year.

Fitton, whose firm designs employee share plans, said he did not believe the review would be complete in time for the start of next financial year, and that “nothing will happen for 12 months”.

“The reality is that the Government is proposing to review many aspects of the provision but is refusing to allow the existing Division 13A concessions to continue in the interim.”

However, he said not all types of available employee share plans are embraced within the ambit of the Budget provisions.

“There are four types of employee share plans that can continue to operate unaffected by the Budget provisions, including in the listed and unlisted markets."

He said the lack of industry consultation was surprising considering the employee share plan legislation has been in place for 13 or 14 years without substantial change.

“A lot of companies, including in the financial services sector, have been relying on the legislation, and then suddenly they make a decision to withdraw and tax it.

“What would happen if the Government suddenly did the same for superannuation?” he asked.