Shaun, along with other prominent advisers on employee share schemes, has been advocating for a decade for the removal of “a seemingly innocuous” line in the tax rules that treats the cessation of employment as a taxing point for tax-deferred shares or share rights.
“The problem is that, in the real world, leaving a job doesn’t always neatly line up with a liquidity event, which would enable a participant to sell shares to fund their tax liability,” Shaun explains. “Apart from the inconvenience of triggering a taxing time without an employee being able to sell their shares, a more pernicious aspect to this rule has been that the taxable amount is calculated by reference to the company’s share price at the leaving date.”
Shaun writes that the federal Budget announcement of the deletion of this rule “will do away with the need to structure around the problem and position Australia more favourably against international benchmarks.” He also welcomes the relaxation of regulatory restrictions, which have cruelled demand for share schemes among unlisted companies. “The current class order relief for unlisted companies is extremely difficult to apply in practice – to the point of being virtually inaccessible to most companies.”
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