Tax Office warning on employee share schemes

Media release 2007/19

The Tax Office today warned employees, directors and executives to be cautious of using trust arrangements to reduce tax on options and shares acquired under an employee share scheme.

Under the arrangements an individual (typically a director or executive) is entitled to the rights to acquire shares under an employee share scheme.

The individual arranges for those rights to be granted to an associated trust. The trust then acquires the shares at below market value, sells the shares and distributes the gain to an associate with losses or who has a lower tax rate.

Tax Commissioner Michael D'Ascenzo has raised concerns about the efficacy of the arrangement.

This arrangement is one of the areas being reviewed by the Tax Office including the high-income individuals project announced in the 2006-07 Compliance Program.

Further details are available in Taxpayer Alert (2007/4) which issued today and is available from the Tax Office website, www.ato.gov.au/atp