Treasurer Wayne Swan has admitted the Government acted too rashly in its decision to crack down on employee share schemes.
According to media reports, the Government has begun consultations with tax experts, business representatives and trade unions about how to overhaul the tax treatment of employee share scheme to minimise tax avoidance while ensuring the schemes endure.
During the Budget announcement, the Government proposed taxing employee share schemes when employees are granted discounts or options on shares, rather than when they vest — that is, when employees take ownership of the shares or sell them.
The Australian Mines and Metals Association (AMMA) chief executive Steve Knott told MINING DAILY that the Government’s proposed legislative change did nothing to minimise tax avoidance but rather served to infuriate AMMA’s member companies.
“We already know that more than 90% of member companies have a share scheme in place and in some cases they have been in place for more than two decades,” he said.
“The share scheme was trashed over night by an ill considered decision that was handed down in the Budget. The proposed legislation has been met with so much hostility that I can honestly say I have never seen anything like this in my 20 years working for the minerals industry.”
Knott said the Government’s proposed changes would make it difficult for resource companies to offer appealing remuneration packages in the current environment where salary freezes are not uncommon.
“Significantly, at present, as the resource sector struggles in the current economic conditions, employee share ownership plans are also particularly helpful in terms of employee engagement and alignment for resource companies with low cash reserves unable to offer high salaries or bonuses,” he said.
Last week, some of the mining industries biggest movers and shakers started to put their share scheme bonuses on hold.
Alcoa, which has more than 75% of shop-floor employees taking part in its existing employee share plan, suspended its arrangements and is converting planned salary sacrifice share purchase arrangements to taxable salary in future pay periods.
However, big businesses may not need to freeze their schemes for long. Yesterday, Swan accepted blame for the policy bungle that sparked a huge backlash from businesses and unions.
“I certainly think mistakes have been made in this area. I accept responsibility for that,” he said.