Govt caves in to share scheme criticisms

(AAP) - The Rudd government has bowed to pressure over its budget changes to employee share schemes, fast-tracking consultations designed to ensure average workers don't come off second best.

Less than a fortnight on from the budget, Treasurer Wayne Swan signalled the
government was conscious that low-to-middle income workers might have inadvertently
been caught in a policy targeted at the top end of town.
On Sunday, the government announced it would release an options paper examining
alternative proposals within a fortnight and would fast-track community discussion
on what modifications might be necessary.
"Given the community concerns with the proposed changes and the possible unintended
adverse impacts on employee share scheme arrangements for ordinary employees, the
government will be fast-tracking the consultation process," said Mr Swan, who made
the announcement with Assistant Treasurer Chris Bowen.
Unions and business joined forces to criticise the measure, which meant anyone
earning more than $60,000 would have to pay tax on their employee scheme shares up
front, rather than when the stock was sold.
The opposition claimed the backdown was more evidence of the government's inability
to manage the economy.
The measure essentially stops employees deferring and avoiding paying tax on their
shares. It also limits a $1,000 concession to people earning less than $60,000.
As a result of the proposed changes, some companies began closing the schemes down,
meaning the government would lose any extra tax revenue it anticipated and all
workers would lose out.
Opposition assistant treasury spokesman Tony Smith said it was a humiliating
backdown for the government.
"Ignorance and an ideological hatred of workers having shares created this chaos,
and stubbornness and a refusal to take responsibility has prolonged it," he said.
"At last it appears that the government is finally coming to terms with the wreckage
it has spread across workplaces all over Australia, but only after nearly two weeks
of parroting glib lines like demented cockatoos.
"This debacle is a window into Labor's economic incompetence and total lack of
understanding of the modern workplace."
The government insists it was always going to consult widely about the tax policy,
which was virtually ignored on budget night but has since attracted some of the most
stringent criticism.
It indicated it was taking on the board the concerns voiced since the budget.
"(We will be) examining the most efficient way of protecting the tax base and
cutting down on potential avoidance and confusion at the higher end, while
maintaining the current support for employee share ownership schemes, particularly
for low and middle income workers," the ministers said.
The government will seek feedback on the original arrangements, as well the new
policy. It also wants ideas on alternative solutions to address problems identified
with current arrangements.
Among the issues to be covered in the options paper will be:
* the reporting requirements necessary to address tax avoidance concerns;
* the income threshold for accessing the $1,000 tax exemption for upfront taxation,
which would ensure the continued availability of employee share schemes for low and
middle income employees;
* whether there are circumstances under which it may be appropriate to provide for
the deferral of taxation, the period of deferral and what those limited
circumstances would be; and
* whether the tax law provisions which determine the market value of discounted and
deferred shares or rights result in undervaluation.