Not really, rstuart.

>>There are two issues. Firstly, there is the problem you allude to, which is you don't want to have to pay the tax on the shares upfront... The second problem is worse. After a certain period of time the taxable capital gain you get from selling the shares drops by 50%.<<

The first issue is simply the concept of paying tax on money that you may or may not earn in the future, and having no recourse to get that tax back if you don't earn that money.

That is quite simply theft.

I don't see the merit in the company indulging in fancy avoidance tactics either. The company would bear the whole cost if the taxman changed the rules. Which happens, let's face it.

The second is merely an existing tax ruling. It could also change at the drop of a hat.

But there must have been a reason behind it, when it was originally implemented.

What was that reason, do you think?

Pericles: "That is quite simply theft."

Well yes. I guess the best that could be said for it is know the money is going to get stolen, so it is your choice. I don't think the decision they made was the best way to handle the problem, just that it was better than doing nothing.

Pericles: "I don't see the merit in the company indulging in fancy avoidance tactics either."

The whole point of PAYG is to lower tax avoidance, and lower the cost of tax collection. It works. You apparently see some advantage in wage payment scheme that undermines PAYG by deferring some of the tax until later, so it is no longer PAYG. That's fair enough. But since employer gets the advantage, so I don't why they should not be lumbered with whatever additional costs the introduced complexity entails. It is just a case of user pays. I don't want the cost of my portion of the ATO budget to go up just because you have introduced some fancy remuneration scheme.

Pericles: "What was that reason, do you think?"

Buggered if I know, Pericles. When you ask questions like this, you always seem to have an answer in mind. What is it?

Just a random point though. They obviously wanted to divert investment into the share market, away from things like housing. We now have vacancy rates at a very unhealthy 1.5% in times of record low interest rates. Not a good look.

I guess that depends what you see as being the "problem", rstuart.

>>I don't think the decision they made was the best way to handle the problem, just that it was better than doing nothing.<<

If the perceived problem was that some rich folk were using share options as a tax avoidance mechanism, then I absolutely disagree that it was "better than doing nothing".

But you do seem to have an odd view of the whole scheme.

>>You apparently see some advantage in wage payment scheme that undermines PAYG by deferring some of the tax until later,<<

For one thing, the provision of share options is in no way a direct alternative to salary.

For another, there is no "deferring" involved, if no value has been transferred (from the company), and you are unable to access the consideration upon which you are being taxed.

>>But since employer gets the advantage, so I don't why they should not be lumbered with whatever additional costs<<

Eh? What advantage might that be? The schemes are designed as a longterm benefit for the employee, with the value of that benefit tied to the success of the company they work for.

>>When you ask questions like this, you always seem to have an answer in mind<<

I have an opinion. I was somewhat interested in yours.

But since you seem to classify the whole process as a plot by greedy capitalists to divert money from your pocket into theirs, I withdraw my question.

Perciles: "The schemes are designed as a longterm benefit for the employee."

My turn to say eh? Look, if you are doing it purely for my long term benefit, how about you just give me the cash. If I agree it is in my best interests, I will use it to purchase the shares/options in my employer myself. From the employers point of view giving cash is much simpler and cheaper than trading shares. So why would an employer choose to remunerate in shares, I wonder? (My turn to ask a rhetorical.)

Perciles: "For another, there is no "deferring" involved, if no value has been transferred (from the company), ..."

You have got me totally confused. If "no value has been transferred from the company" (to the employee you mean?) then presumably the employee paid full price for the shares. Ergo there is no tax liability.

Perciles: "... and you are unable to access the consideration upon which you are being taxed."

More confusion. Apart from selling the shares or options on the open market immediately, you mean?

From what I can tell, you are saying the tax on these two transactions should be handled differently:

(a) The company gives $X to the employee, on the condition he buys shares in the company.
(b) The company pays $X on a batch of shares, and gives them to the employee.

In the first case you are happy for the tax on the $X to be paid immediately. In the second you want to:

(a) defer the tax on $X, and
(b) make more work for the tax office by having them collect the tax off the employee rather than their employer, and
(c) if the employee aligns his interests with the companies share price by holding on to his shares for a while, enjoy a 50% tax break.

In fact I bet that last bit is the answer to your rhetorical earlier. And you expect me (who is now mostly a PAYG tax payer and has to fund this 50%) to be happy with this cosy arrangement? Geezzzz.