Employee share scheme tax simplification efforts welcomed

Media Release – 1st April 2015

KPMG welcomes employee share scheme tax simplification efforts

Rebecca Armour – Head of Global Mobility Services

For immediate release

KPMG Head of Global Mobility Services, Rebecca Armour, welcomed the release of a proposal aimed at reducing compliance costs for employees that participate in employee share schemes.

Ms Armour noted that “At present employees pay the tax on share benefits they receive rather than having tax deducted and paid by their employer as is the case on their salary and wages. As a result, employees can face a particularly hefty tax bill at year end and also have to manage provisional tax and interest. This can detract from the otherwise attractiveness of employee share schemes, which offer employees an ownership stake in the business.” says Armour.

“Employee share schemes are popular and well established overseas, but are less well entrenched in New Zealand. To fuel an innovative and prosperous economy, it is important that these types of schemes be encouraged. Removing tax barriers is part of this.”

The proposal to collect the tax on employee share scheme income, in the same way as either cash salary or fringe benefits, is the right move according to Armour. The main concern with the proposal is the impact on schemes already established. These have been established on the understanding that the employee pays the tax. Any change to the way tax is paid needs to make sure that this does not override the agreed position between employers and employees. Otherwise, employee share schemes will be more costly than anticipated.

“Employers need to pay careful attention to ensure that benefits provided under existing schemes have the expected outcome for the employer and the employee” says Armour.

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