Welcome to the November 2012 issue of GuerdonNews®
In this issue we:
• Provide background to a recent ATO determination that means premium priced options may now be subject to fringe benefits tax
• Report on a new use of equity for UK companies to reduce employment risk and potential cost
• Alert directors to a Federal Court decision indicating that the taxation point of employee share grants may be earlier than the actual grant date
• Note government mid year budget changes that might impact executive and broad based employee remuneration costs
We conclude with the latest on executive and director remuneration disclosure updates available on the GuerdonData® on-line database and references to Guerdon Associates in the news media since our last newsletter.
ATO rules FBT payable on share options with a nil income tax value
The move is expected to adversely affect small resources and start-up technology companies
The ATO has determined that a grant of premium priced options with a nil value under the employee share scheme tax regime set out in Division 83A of the Income Tax Assessment Act 1997 is nevertheless subject to fringe benefits tax (FBT).
Premium priced options are a common method of executive remuneration in cash poor start up resources and technology companies.
A creative use of equity to reduce risk and encourage workforce flexibility
Provided you are in the UK
The UK government announced plans for a new "employee-owner" employment contract, where employee-owners will receive shares worth between £2,000 and £50,000 and will not pay capital gains tax on any gains when they sell those shares. In exchange, employee will forgo certain employment rights, including those relating to unfair dismissal and redundancy.
The Federal Court confirms taxation point of employee share grants
Just when were those options acquired?
The Federal Court upheld a finding that a taxpayer acquired the options pursuant to an employment contract when he commenced employment, even though the options were not actually granted until after shareholder approval 5 months later.
Mid year Australian budget changes will have little impact on executive remuneration
However, remuneration committees should be aware of the possible impact on the broader employee population
The Treasurer’s Mid-Year Economic and Fiscal Outlook 2012-13 has been released on 22 October 2012, which removes the concessional tax treatment for salary sacrificed "in house" fringe benefits.
Such fringe benefits have long been a part of some companies' attractiveness to current and potential employees. While not a big impost on executives, the cost to companies maintaining such benefits for their workforce could be significant.
Latest GuerdonData® Updates
Updates to GuerdonData® include disclosures from the following 11 companies:
BANK OF QUEENSLAND LIMITED, DISCOVERY METALS LIMITED, REGIS RESOURCES LIMITED, TEN NETWORK HOLDINGS LIMITED, LINC ENERGY LTD , NOBLE MINERAL RESOURCES LIMITED, MYER HOLDINGS LIMITED, TPG TELECOM LIMITED, PREMIER INVESTMENTS LIMITED, NORTHERN STAR RESOURCES LTD, WESTERN AREAS NL
Executive and director remuneration data from all ASX 300 companies on GuerdonData® is available to any subscriber. Visit our website for more information on GuerdonData®.
Assess how easily you can find out director and executive pay information by viewing our 6 minute demo. Click on the “More Info” button below.
Guerdon Associates in the news
“Power pay deal ‘highly unusual’”, Daniel Mercer, The West Australian
27 October 2012
“Era of excessive CEO pay is over”, Lisa MacNamara, The Australian, p.21, 2 November 2012
“Investors back CBA push to put customer satisfaction in remuneration”, Leading Company, 30 October 2012