CPA - The Guardian

It was a Federal Budget tax change that workers would have been considered part of the “fine print” in times gone by. The announcement by Treasurer Wayne Swan that tax on employee share schemes can no longer be deferred has given rise to a howl of protest – and not just from the big end of town. Unions are up in arms about the effect it will have on many ordinary Australian workers. The finances of workers and their families are no longer linked to fluctuating markets solely through their superannuation. In recent times more and more workers have been making salary sacrifices, foregoing wage rises and cash bonuses in exchange for shares and options from their employers. More than ever, workers are being forced to sweat over the bosses’ bottom line and the kindly disposition of big shareholders.

If Swan’s proposal survives the growing opposition, tax on these share schemes can no longer be put off for up to 10 years. The exemption from tax for the first $1,000 of benefit would only be available to workers earning up to $60,000 a year. Up to four million Australian workers could be affected by reviews of schemes being conducted by the top 500 companies. Schemes are also offered by relatively small businesses. Many are thinking to abandon them if Swan’s plan becomes law. This is a change that will not only be felt at the margins.

The Finance Sector Union (FSU), the Shop Distributive and Allied Employees Association (SDA), the Australian Workers Union (AWU), the Association of Professional Engineers, Scientists and Managers Australia (APESMA) and other unions have joined industry heavyweights and accountant groups in decrying the move. The injustice they all point to is that workers (and CEOs for that matter) will be levied tax when they haven’t received any actual income.

“It is the concept of taxing people for a benefit which at least half of them will never receive,” National Australia Bank chairman Michael Chaney told The Australian Financial Review last week. The FSU and other unions are considering a wage claim to compensate employees for the loss of access to the various share schemes on offer.

Schemes promoting employee shareholdings in the company that hires them have been on the rise, especially since the Howard government spent $1.7 million in the 2003-04 budget to establish a special unit within the Department of Employment and Workplace Relations to promote them. The resources boom and steadily rising share prices made it a relatively easy sell.

It tapped into the spirit of neo-liberal triumphalism of the time. It was rolled out at the same time unions were targeted and legislation enacted to remove them from the workplace. Workers were being strongly encouraged to see their future security not in organisation with other workers but with the increased profitability of the boss.

For some time workers had been conditioned to take an interest in the share market through compulsory superannuation. A share scheme was a very short leap for many workers.

The share market bubble has burst for the time being but the government is keen to wring tax dollars out of workers by means other than straight income tax. Plenty of workers on relatively modest incomes will suffer as a result of the move. As AWU national secretary Paul Howes points out, $60,000 a year no longer offers a champagne budget. A question for bosses is how to dress up salary packages and make them look attractive without the share and option offers.

Alternatives are being proposed to answer the argument from the government that the measures are necessary to close down loopholes allowing massive tax avoidance and evasion. The FSU argued initially that the threshold for the tax benefit should be raised to $180,000 per annum. The share value could be featured on the group certificate. The fact is that the high flyers will continue to find the most creative ways to minimise their tax. Workers are sitting ducks.

The federal government insists it is still supportive of employee share schemes. It has the neo-liberal credentials to back up the claim. Workers, on the other hand, must make a sober reassessment of the value of such schemes and press through their unions for more dependable income for themselves and their families. Decades of “win/win” hype have not altered the reality that workers do not have the same interests as their bosses.

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