The Government intends to introduce legislation to make minor amendments to the income tax provisions relating to employee share schemes.
The provisions will be amended to ensure that the deferral income tax concession for employee share schemes will be available in respect of schemes offered to at lent 75 per cent of permanent employees. The failure of the initial legislation on employee share schemes to specify that the test would use permanent employees as the benchmark in the case of this concession was apparently an unintended omission, and the previous Government had foreshadowed that an amendment to rectify the situation would be made. This amendment will not affect the ability of employers to allow non-permanent employees to participate in employee share schemes.
The amendment will have effect from the date of the original share scheme legislation.
The second amendment will correct a defect that arose during the passage of the Taxation Laws Amendment Bill (No. 1) 1997. It relates to the percentage of employees who must be entitled to financial assistance under an employee share scheme before the scheme ran attract the concessions available under the income tax law.
As the law now stands, a "75 per cent of permanent employees" requirement applies to a claim for the exemption concession available for employee share schemes, but the employee threshold for financial assistance under that concession is two thirds. It was not the intention of the Parliament that different thresholds apply within the exemption concession.
The legislation, which will be introduced as early as possible, will apply a common 75 per cent threshold for eligibility for the concessions. The amendment will change the reference to "two thirds" in paragraph 139GF(4)(b) to "75 per cent". It will apply from 1 July 1996.
The Bill mentioned above gave effect to an important election commitment of the Government in respect of employee share schemes, by doubling from $500 to $1000 per year the tax free amount under qualifying schemes the: employees are entitled to.
The Government has discussed the amendments with the Labor Party and they have given their support.
25 July 1997
Contact: Geoff Miller(ATO) (06) 2161483