The Treasurer handed down the Federal Budget last week. Detailed below are the key tax measures announced that are relevant to Human Resources managers who will need to familiarise themselves with the developments.
Employee share schemes
The Government will remove the cessation of the employment taxing point for tax-deferred Employee Shared Schemes (ESS). This change will apply to ESS interests issued from the first income year after the date of Royal Assent of the enabling legislation.
Employers use ESS to attract, retain and motivate staff by issuing interests such as shares, rights (including options), usually at a discount.
Currently, under a tax-deferred ESS, where certain criteria are met, employees may defer tax until a later income year (the ‘deferred taxing point’). The deferred taxing point is the earliest of the following:
- the employee’s cessation of employment;
- in the case of shares, when there is no risk of forfeiture and no restrictions on disposal;
- in the case of options, when the employee exercises the option and there is no risk of forfeiting the resulting share and no restriction on disposal; or
- the maximum period of deferral of 15 years.
This change will result in tax being deferred until the earliest of the remaining taxing points.
The Government will also reduce red tape for ESS by:
- removing regulatory requirements for ESS, where employers do not charge or lend to the employees to whom they offer ESS;
- where employers do charge or lend, streamlining requirements for unlisted companies making ESS offers that are valued at up to $30,000 per employee per year.
This measure is intended to help Australian companies engage and retain the talent they need to compete on a global stage.
Repealing the work test for voluntary contributions
The Government will allow individuals aged 67 to 74 years (inclusive) to make or receive non-concessional (including under the bring-forward rule) or salary sacrifice superannuation contributions without meeting the work test, subject to existing superannuation caps.
Individuals aged 67 to 74 years will still have to meet the work test to make personal deductible contributions.
Currently, individuals aged 67 to 74 years can only make voluntary contributions to their superannuation, or receive contributions from their spouse, if they are working at least 40 hours over a 30-day period in the relevant financial year.
Removing the requirement to meet the work test when making non-concessional or salary sacrifice contributions will simplify the rules governing superannuation contributions and will increase flexibility for older Australians to save for their retirement through superannuation.
This measure will have effect from the start of the first financial year after Royal Assent of the enabling legislation, which is expected to occur prior to 1 July 2022.
Removing the $450 monthly threshold for superannuation guarantee
The Government will remove the current $450 per month minimum income threshold, under which employees do not have to be paid the superannuation guarantee by their employer.
The measure will have effect from the start of the first financial year after Royal Assent of the enabling legislation, which the Government expects to have occurred prior to 1 July 2022.
This measure will improve equity in the superannuation system by expanding the superannuation guarantee coverage for individuals with lower incomes.
The superannuation measures in this Budget also serve as a timely reminder of the upcoming superannuation changes. From 1 July the Super Guarantee is scheduled to increase from 9.5% to 10%. This means employers will have to contribute more to an employee’s super account.
How can Rigby Cooke help?
If you would like to discuss the Workplace Relations aspects of the Treasurer’s budget, please contact a member of our team.
For further details on the tax measures announced, read our Federal Budget 2021-22: overview of taxation measures article.
1. Federal Budget 2020-21 materials: Budget Paper No.2 2021-22.
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