Simple tax change could help boost employee share ownership

by Employee Share Ownership on August 2, 2017

Article from The Australian by Employee Ownership Australia and New Zealand chair Angela Perry.

12:05AM July 29, 2017

Imagine that when you leave a job, you take a sizeable nest egg in the form of a piece of the company — on top of your superannuation.

Thanks to employee ownership schemes, many Australian workers are able to do just that.

Just over one in four companies on the ASX 200 have schemes that help staff accumulate equity in their firms, according to the Employee Ownership Australian Index, which was launched earlier this year.

The concept of employee ownership is central to individual wealth creation and has the potential to be an important savings vehicle for a sizeable number of everyday Australians.

And with more of us working for multiple companies during our working life, owning a stake in your workplace and being able to transfer those shares easily — either towards or into superannuation — is vital.

Workers are much more open to change. Companies notice that having an ownership stake also gives them a new sense of understanding what it is like to be an owner and not just an employee, which often leads to culture shifts.

University of Melbourne research also found that owner-employees have a sense of belonging, of being part of the company, as well as increased engagement, and a strong sense that they are building a nest egg.

It turns out that when you have a stake in your workplace you are happy to go the extra mile.

This is why we think there are more changes that are needed to encourage broad employee ownership and help employees save for retirement.

One key measure would be removing tax at cessation of employment, when an employee leaves their job.

At present, when employees leave their jobs, they are taxed on shares accumulated through employee ownership schemes, usually at their marginal rate.

So workers often are forced to sell some or all of their shares when they leave a company.

Australia is the only country that taxes employees on cessation of employment.

In Australia, tech success story Computershare offers its 16,000 employees two share ownership scheme options.

In one scheme, each employee contributes a minimum of $1500 and up to $5000 over 12 months in equal instalments, and Computershare matches that contribution dollar for dollar, up to $3000 a year, to buy shares.

Computershare also offers another scheme where employees who elect to take part contribute $500 over 12 months in equal instalments and the company contributes $500 to buy shares.

Computershare digital channels team leader Evan Giosis has been able to build up a sizeable stake during his 17 years with the firm, which provides corporate trust, stock transfer and employee share plan services.

Giosis says he is more passionate than ever about the success of share schemes. “Not only because they pay me to do a job I love but also because I now own a part of the company,” he says. “The dividends also come in very handy trying to keep up with the appetite of my three young boys.”

Computershare’s employee equity scheme is a great example of how this is working positively.

By removing tax at cessation of employment the federal government would help employees to own a stake in their company and save for their futures.

Angela Perry is the chairwoman of Employee Ownership Australia and New Zealand and is a qualified English barrister and Australian qualified solicitor.

From: http://www.theaustralian.com.au/careers/simple-tax-change-could-help-boost-employee-share-ownership/news-story/7ee30ec70f20a29d9f08b7bbaf9e5334

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