Employee Share Scheme Tax Systems Set For An Update

The taxation liability under employee share tax scheme is discouraging many small firms in Australia to use this option. Generally companies offer a share of their growing equity to the talented workforce to make them stay in the current organisation. The rigid tax treatment of such schemes is resulting in more tax liability on the part of the employee turned shareholders. Many entrepreneurs believe that share option scheme is a form of key currency that results in holding talented pool within organisation. It also acts as a resource for the company owners who don’t have mush capital resources to employ highly paid professionals. 

Many taxation experts believe that the employees holding shares become liable to high taxes based on the assets value, even if the company has not started earning any revenue till date. “Updating tax treatment rule is the demand of the hour” as quoted by Malcolm Thornton, investment director at venture capital fund Starfish Ventures. Thornton also believes that the employee share tax scheme needs to consider various types of companies that exist in Australia, so that a large number of organisations could benefit from this share option scheme. 

When experts were contacted to give their comment on this issue, their common opinion was that “an employee is less concerned about the formalities and taxation liabilities that come with holding a share. However, a company which is offering shares needs to understand and consider every aspect of the legal process while offering its shares to employees”.

 

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