Lawyers, employers, frustrated by legislative delays
News | 24 August 2009 | Kate Gibbs
Lawyers and their clients are being held ransom by delays over draft laws governing employee share schemes.
LAWYERS and their clients are being held ransom by delays over draft laws governing employee share schemes.
A Senate committee report, released last Monday, recommended the government delay the passage of proposed employee share scheme laws until the Productivity Commission and Treasury Secretary Ken Henry have completed taxation reviews.
The government sparked an outcry in its May budget when it proposed taxing employee share schemes when employees are given discounts or options on shares, rather than when they vest. It has since softened the planned reforms, changing for example the income threshold where workers are eligible for certain exemptions.
Workers who invest in an employee share scheme have received a tax exemption of $1,000, since 1 July for taxable incomes of up to $180,000. The previous threshold was for people earning $60,000 or less.
The revised version was set to push ahead, with lawyers and their clients readying themselves for a confirmation of the changes.
"We were all assuming the revised version would press ahead," said Tresscox Lawyers partner Michael Bracken.
But a Senate economics references committee examining the planned changes - which is dominated by lawmakers from the Opposition - has issued a report recommending the government delay the introduction of the legislation. The delay has left companies, whose Annual General Meetings are approaching, up in the air, said Bracken.
"If [companies] want to issue shares to employees or make changes to the employee share plans, they are in a state of flux because they don't know whether the proposed legislative changes are going to be in place," he said.
“So the difficulty is to decide whether they are going to run on the basis that the changes will ultimately come through, or assume they won't come through until next financial year. It's not clear where it's heading at the moment," said Bracken.
"It's up to Treasury whether they adopt the Senate recommendations to delay it.”
Bracken advises some listed entities, who want to give rewards to their employees as incentives, on the pending legislation. "But they are not sure how to structure their plans because they will have different tax consequences under the new proposed regime," he said.
"One of the concerns now is whether the Senate Committee recommendations will delay the proposed legislation and whether the changes will apply this financial year or next financial year. The assumption of course was that it would apply this year.”
Bracken says the delay is frustrating for lawyers and clients alike, noting that "it would be beneficial if the issue is dealt with sooner rather than later".
“It’s difficult for lawyers because of the uncertainty caused by the Senate Committee recommendations and particularly as we had assumed that a solution had been lobbied and the draft legislation has been released.”