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Employee share acquisition schemes: transitional arrangements and certain superannuation aspects



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TREASURER

PRESS

RELEASE NO.

EMBARGO

EMPLOYEE SHARE ACQUISITION SCHEMES - TRANSITIONAL ARRANGEMENTS AND CERTAIN SUPERANNUATION ASPECTS

I am announcing today further details of the new taxation arrangements for employee share acquisition schemes. These cover the transitional arrangements for offers that were in the process of being completed at the time of the Budget announcement, and certain aspects of the treatment of ESAS for superannuation purposes.

The taxation arrangements I announced on Budget night provide an effective and equitable treatment of remuneration received as share discounts, while providing incentives through the concessional arrangements for ESAS that are designed to improve workplace productivity.

Transitional Arrangements

The Government has decided to provide transitional arrangements to ESAS that were in the process of being completed on Budget night. Under the transitional arrangements, the taxation arrangements that were in place before the Budget will apply to share or share right discount remuneration, where the following conditions are met:

in the case of a public company (using the Corporations Law definition), a decision had been made by shareholders after 1 April 1994 but before 7.30 pm 10 May to offer employer or holding company shares or rights, the decision specified the maximum number of shares or rights or the maximum value of shares or rights to be offered - either per employee or in total -and the shares or rights are acquired (in respect of employment by employees or employees of subsidiaries) no later than 29 July 1994; or

in the case of a public company (using the Corporations Law definition), an invitation had been made to employees after 1 April 1994 but before 7.30 pm 10 May to make an offer to acquire employer or holding company shares or rights, with the invitation specifying the maximum number of shares or rights or the maximum value of the shares or rights - per employee or in total - and the shares or rights are acquired (in respect of employment by the employees or employees of subsidiaries) no later than 29 July 1994; or

an offer, which specified the maximum number of shares or rights or the maximum value of shares or rights to be offered - per employee or in total - of employer or non-employer company shares or rights had been made to employees before 7.30 pm 10 May, and the shares or rights are acquired (in respect of employment by the employees or employees of subsidiaries) no later than 29 July 1994; or

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an offer of employer or non-employer company shares or rights had been made to employees before 7.30 pm 10 May, and the offer did not specify the maximum number of shares or rights or the maximum value of shares or rights to be offered, then the transitional arrangements will apply to shares (up to a value of $1500 per employee) or rights (over shares with a value at the

time the rights are acquired of up to $1500 per employee) acquired (in respect of employment by the employees or employees of subsidiaries) no later than 29 July 1994. For the transitional arrangements to apply in these circumstances, employers would be required to make an election as to which shares or rights would be covered by the pre-10 May 1994 tax arrangements.

Exercise of Rights Acquired before 10 May 1994

Where share rights were acquired under an ESAS before 7.30 pm 10 May 1994, the pre-10 May 1994 tax treatment will continue to apply to shares acquired as a result of the exercise of those rights after 10 May.

ESAS and Superannuation

The current taxation treatment is that where a taxpayer receives benefits under an ESAS, and there is a sufficient connection between the benefits and termination of employment, the benefits may count as an eligible termination payment (ETP).

In light of the new taxation arrangements, share discounts subject to the post-10 May ESAS arrangements will no longer be taxed as ETPs nor count toward the superannuation Reasonable Benefit Limits.

Remuneration received as share discounts will continue to be excluded from the definition of Highest Average Salary for the purposes of calculating Reasonable Benefit Limits.

CANBERRA 29 June 1994

Contacts: Mr Paul Tilley Mr Geoff Miller

Treasurer's Office ATO

Ph. 06-277 7340 Ph. 06-216 1483