Changes make employee share schemes ineffective

remuneration/federal-budget/

15 May 2009
| By Lucinda Beaman |

A partner at Moore Stephens has warned that the changes to employee schemes represent a retrograde step that will limit the remuneration tools available to companies.

Michael Dundas of Moore Stephens said the changes to employee share schemes announced in the Federal Budget will have a negative impact on both employers and employees, and furthermore will not achieve the Government’s objectives.

Dundas argued that the deferment of tax payment on shares or options received as part of an employee share scheme until sale will mean most employees will not be able to participate.

This would, “in turn, make them ineffective to employers as remuneration and retention tools”, Dundas said.

“This does not equate to an improvement in the fairness and integrity of the existing provisions,” he said.

Dundas believes that most employers would “abolish their employee share schemes if these changes go ahead”.

“This would be a significant retrograde step and would result in employers having less flexibility and fewer tools at their disposal in the remuneration of their staff.

"Ultimately, this is going to cost the Australian economy, as it will have a negative impact on corporate productivity through the reduction of incentives.” Dundas added.

Furthermore, Australian companies would be less able to attract skilled foreign executives, Dundas said.

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