Higher taxes on share, option and termination payments

One outcome that most pundits can bet on is that if there is an excuse to raise taxes under the guise of “it will be good for you”, then it will be done. The changes noted below are part of the process of aligning the Victorian and New South Wales payroll tax arrangements to reduce red tape for business.

You need to be aware that under the Victorian Payroll Tax Act 2007, with effect from 1 July 2007:

• The value of an employer’s contribution to any grant of shares or options to an employee, a director, former director, member of the governing body of a company or a former member of the governing body or deemed employee will be counted as wages and liable for payroll tax (at the rate of 5.05%).

The liability to payroll tax arises either on the date on which the share or option is granted to the employee or the date it vests to them, at the election of the employer.

The value of a share or option is the “market value” on the relevant date, as determined in accordance with the Commonwealth income tax provisions.

• Liability for payroll tax has been extended to termination payments to non-employee directors and deemed employees – the definition of a termination payment now includes amounts paid by a company following the termination of the services of directors, former directors, members of a governing body, former members of a governing body or deemed employees under a relevant contract.

See State Revenue Office Payroll Tax Factsheet July 2007 HERE.

© Guerdon Associates 2024
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